• Handle Gambling Definition Synonym
• Handle Gambling Definition Synonyms
• Handle Gambling Definition Psychology

Gambling is a $140 billion per year industry. Although the consumer electronics industry is larger ($186.4 billion), the gambling industry is larger than the cable TV ($97.6 billion), outdoor equipment ($11 billion), U.S. box office ($10.2 billion), and U.S. music ($7.0 billion) industries combined. As a matter of fact, in the twenty years from 1991 to 2011, consumer spending on commercial casino gaming grew from $8.6 billion to $35.6 billion—an increase of 314 percent!

With such a dramatic increase in gambling activity in the United States, gambling reporting has also increased. But exactly how to report this activity can be confusing.

The handle is the total amount of money bet. At a game like craps, all of the bets made on a table contribute to the handle, whether the bets win or lose, are made with cash or chips and are paid even money for bets like the pass line or 30-1 for bets like two and 12. Players often confuse the handle (total bets) with the drop. Business gambling occurs when a person or organization operates a gambling hall that collects fees or takes a portion of the amount the players bet. For example, a person who holds a 'casino night' party and charges an entry fee is engaged in an illegal activity in a state that prohibits business gambling or gambling for profit. Handle - A sports wagering term that means the total amount of bets taken. Hedging - A sports betting term that means placing wagers on the opposite side in order to cut losses or guarantee a. Gambling disorder involves repeated problematic gambling behavior that causes significant problems or distress. It is also called gambling addiction or compulsive gambling. For some people gambling becomes an addiction — the effects they get from gambling are similar to effects someone with alcoholism gets from alcohol. Handle definition: 1. A part of an object designed for holding, moving, or carrying the object easily: 2.

And unfortunately, the seventeen words of IRC Sec. 165(d) provide little guidance on the reporting requirements of wagering gains and losses. (Footnote 1) The IRS instructions say little more than “gambling income” shall be reported as “other income” on IRS Form 1040 (Footnote 2), and if a taxpayer elects to itemize his or her deductions, then “gambling losses” are included on Schedule A (Itemized Deductions) as “other miscellaneous deductions not subject to the 2 percent limitation” but only up to the amount of winnings. (Footnote 3)

To further complicate matters, the IRS computer matching program, which makes sure that a taxpayer includes all of his gambling winnings reported on Form-W2Gs, completely ignores the IRS-preferred and Tax Court-approved methodology of gambling sessions. This inconsistency is also repeated by every tax software package that the author has personally reviewed.

It should come as no surprise then that with such vague instructions, it is likely that the vast majority of tax returns that report gambling income—whether prepared by the taxpayer, a tax professional, or tax software— are prepared incorrectly. This article will provide a step-by-step guide for the proper treatment of gambling income.

Step 1: Include All Wagering Gains in Gross Income

Gross income is defined very broadly. It includes “all income from whatever source derived, except as otherwise provided by law” (Footnote 4), and there is no legislative exception for gambling income. (Footnote 5) Moreover, “It is held that for federal income tax purposes, all wagering gains must be clearly included in gross income” [Emphasis added]. (Footnote 6) The U.S. Supreme Court, the U.S. Tax Court, the U. S. Court of Claims, the U.S. Courts of Appeals, and numerous U.S. district courts have examined this issue and reached the same conclusion—gambling income will be included in gross income. (Footnote 7)

Unfortunately, many taxpayers and tax professionals mistakenly rely upon myth, urban legend, or just bad information when deciding what to include. For example, Gary Bauman mistakenly believed that he was not required to report his $73,733 jackpot because he qualified for a Social Security disability pension. (Footnote 8)

Another common myth suggests that only amounts reported to the IRS on Form W-2Gs should be included. This is obviously incorrect. It does not matter if the wagering gains are won on a cruise ship in international waters or in a foreign country; the amounts need to be included. If an individual has wagering gains from an Internet website, the amounts need to be included. If the wagering gains are from friendly wagers or from a March Madness office pool, the amounts need to be included. If a taxpayer has wagering gains below the Form W-2G reporting thresholds, a very common scenario, the wagering gains still need to be included.

The IRS and judges get suspicious if the amount of gambling income reported by a taxpayer exactly matches the total amount of gambling income reported on Form W-2Gs.On audit, the IRS is more likely to demand that a taxpayer substantiate his or her gambling losses. In like manner, the courts require something more than the (possibly) self-serving oral testimony of the taxpayer As evidence of gambling losses. In several reported cases, the courts suspected that the taxpayers had more gambling income than what was reported to the IRS by the casinos on the Form W-2Gs. As a makeshift form of King Solomon’s splitting-the-baby wisdom, the courts reasoned that their disallowance of the taxpayer’s gambling losses sufficiently offset the taxpayer’s underreported gambling income. (Footnote 9) Either course of action is frequently to the detriment of the taxpayer. Simply put, all means all.

Step 2: Exclude the Basis of the Wagering Gains

Rev. Rul. 83-103, 1983-2 C.B. 148, provides that the “basis” of a wager is excluded from the amount of a “wagering gain.” For example, if a taxpayer purchased a $20 lottery ticket that ultimately won $1 million, then his wagering gain is $999,980 and not $1 million.This step is frequently overlooked or mistakenly included as part of the calculation for wagering losses.

Step 3: Organize and Compute Wagering Transactions by Gambling Session

It is important to recognize that the focus of IRC Sec. 165(d) is on wagering transactions and not on wagering as an activity. Th is is why taxpayers are not allowed to simply net together their total gains and losses for the year and report the difference or rely upon win/loss statements from casinos. (Footnote 10) If such a “netting” methodology is discovered, the IRS and courts consistently force the taxpayer to “un-net” the wins and losses and recalculate the return accordingly. Please be aware that a sampling of such cases shows that the IRS is willing to litigate this issue over relatively small amounts. (Footnote 11)

With this zealous emphasis on transactions, the courts recognized early on that it was impractical for a taxpayer to report every single roll of the dice, pull of a slot machine handle, draw of a card, or spin of the wheel. (Footnote 12) As a result, a bright-line test was devised. A taxpayer’s “accession to wealth” (i.e. wagering gain or loss) is determined when the taxpayer stops gambling. (Footnote 13) Th us, the concept of a “gambling session” was born.

In general, a gambling session is comprised of three unique components—time, place, and activity. By way of example, a taxpayer who gambles at two
different casinos on the same day would have at least two gambling sessions (different places). A taxpayer who played slot machines and black jack on the same day at the same casino would have at least two gambling sessions (different activities). A taxpayer who played slot machines over three days would have at least three gambling sessions (different times). But by comparison, a taxpayer involved in a three-day poker tournament would have only one gambling session since any accession to wealth cannot be determined until the tournament is finished and the final payouts to the participants are calculated and made.

In 2008, the IRS attempted to summarize the gambling-session doctrine in Chief Counsel Advice Memorandum 2008-011, “Reporting of Wagering Gains and Losses” (CCAM 2008-011). Several recent private telephone calls with IRS employees by the author and others confirm the current acceptance of this concept. In addition, the Tax Court indicated its approval of gambling- session calculations in Shollenberger v. Commissioner of Internal Revenue. (T.C. Memo. 2009-306 (U.S. Tax Ct. 2009))

As guidance, Chief Counsel Advice Memorandum 2008-011 provides ten gambling- session examples. For example, if a taxpayer enters a casino with $100, and then at the end of the day redeems $300 worth of tokens, the IRS explains that the taxpayer has a wagering gain of $200 ($300–$100). Or stated another way, the $300 of proceeds less the $100 of basis results in a gain of $200. The IRS further states that “[t]his is true even though the taxpayer may have had $1,000 of winning spins and $700 in losing spins during the course of play.”

Another IRS example describes a taxpayer who enters the casino with $100 and loses the entire amount. The obvious result is a wagering loss of $100, “even though the casual gambler may have had winning spins of $1,000 and losing spins of $1,100 during the course of play.”

The IRS’s course-of-play statements have two major implications. First, the IRS recognizes the reality that a taxpayer may indeed “recycle” his gambling winnings during a single gambling session. For example, if a gambler starts the day with $10,000 in cash, and ends the day with $15,000 in cash but generates $100,000 of W-2Gs in the process, the taxpayer’s gambling winnings for the gambling session are $5,000—not the $100,000 of W-2Gs. In essence, a gambler who recycles his winnings is no different than a day trader who repeatedly buys and sells stocks or a real estate developer who flips houses.

Second, the IRS realizes that ignoring a gambling-session calculation penalizes the taxpayer by overstating the taxpayer’s adjusted gross income (AGI). For example, in the previous hypothetical, without a gambling-session calculation, the taxpayer is required to include $100,000 as gambling winnings as other income and deduct $95,000 of gambling losses on Schedule A. While this method results in the same amount of taxable income ($5,000), the taxpayer’s AGI is greatly inflated. Such an overstatement can easily penalize a taxpayer since AGI is used to calculate the phaseout levels for some deductions and as a multiplier for others.

To exacerbate the issue, several popular tax-preparation programs reviewed by the author ignore the gambling-session methodology as well; they merely total the W-2Gs. Such a limitation requires tax return preparers to alter, modify, override, or otherwise finesse their software so as to include all the individual W-2Gs and satisfy the IRS computer matching system, but simultaneously reduce other income by the amount of recycled gambling winnings so as to properly report the taxpayer’s AGI.

Step 4: Report Wagering Gains as Other Income, Wagering Losses as Other Miscellaneous Deductions

Once the result of each gambling session is determined, all the gambling sessions with wagering gains should be totaled together and included as “Other Income” on Form 1040. Next, if the taxpayer elects to itemize his deductions, all the gambling sessions with wagering losses should be totaled together and included on Schedule A (Itemized Deductions) as “other miscellaneous deductions not subject to the 2 percent limitation.” And don’t forget, the amount of the wagering losses may not exceed the amount of the wagering gains. If the taxpayer elects to take the standard deduction, the amount of wagering losses are ignored and not used. (Footnote 14)

Step 5: Prepare a Gambling-Session Analysis and Explanation for the IRS

IRS computers do a thorough job of matching amounts from documents submitted by third parties to the amounts reported on income tax returns. However, the IRS does not provide a gambling-session equivalent of Schedule D (Capital Gains and Losses), and IRS computers have not been programmed to process gambling- session calculations. Therefore, the tax preparer should consider completing a Form 8275 (Disclosure Statement), notifying the IRS that the gambling-session calculations were prepared in accordance with Chief Counsel Memorandum 2008-011 and Shollenberger v. Commissioner of Internal Revenue. Furthermore, a detailed analysis of each gambling session and a copy of any available gambling diaries should be included. By doing so, a manual review, if necessary, will permit the IRS to find and match up the Form W-2Gs reported under the taxpayer’s identification number.

Step 6: Review the Relevant State-Law Requirements

An often forgotten step is the treatment of gambling winnings and losses at the state level. While the number of state-level audits triggered due to gambling issues is almost nonexistent, a few basic issue-spotting pointers can help identify the major concerns in preparation of income tax returns for the various states.

Obviously, if the taxpayer resides in a state without an income tax, then the taxpayer won’t have to pay state income tax on his gambling income.

But what about amounts won by nonresidents in states that have an income tax? Initially, some states made it a point to aggressively pursue nonresident winners. Then, these states decided to automatically withhold state taxes from any winnings. (It is also important to remember that Native American gambling establishments are exempt from state withholding requirements.) This in turn may require the taxpayer to file nonresident returns in order to receive the appropriate refunds.

But then there is Mississippi. Mississippi automatically withholds three percent from everybody, and it is considered a nonrefundable income tax. Fortunately, it is not necessary to file a nonresident Mississippi income tax return since the documents provided by the casinos are considered to be the income tax return and proof that the tax was paid to Mississippi. Hopefully, the taxpayer’s state of residence will allow a credit for the tax paid to Mississippi.

For the most part, the majority of states follow the federal example of allowing gambling losses to be deducted. However, some states base their income taxes on the federal AGI. As such, these “above-the-line” states do not allow itemized deductions, including gambling losses. Currently, these states include: Connecticut, Illinois, Indiana, Louisiana, Massachusetts, Michigan, Ohio, West Virginia, and Wisconsin. The nonrecognition of itemized deductions, such as gambling losses, makes the gambling-session concept even more important to understand and implement.

As a word of warning, do not assume anything, and frequently research the status of the state laws. For example, many of the general principles discussed previously regarding state taxes are riddled with exceptions if the winnings are from various sources such as lotteries. Furthermore, the political winds can change quickly. As a case in point, in July 2009 the state of Hawaii eliminated the deduction for gambling losses. But on April 16, 2010, legislation was enacted to repeal the prohibition and make it retroactive to 2009. When in doubt, check it out.

Conclusion

It is very likely that gambling and casino entertainment will continue to grow. Now more than ever it is important for tax professionals to become better prepared and equipped to assist their clients in the evolving area of the tax law. Working together, taxpayers, tax professionals, and the IRS can help improve the accuracy, compliance, and understanding of the taxation of recreational gamblers. (Footnote 15)

To learn more about this topic, go to the NAEA webboard.

FOOTNOTES

1. IRC Sec. 165(d). “Losses from wagering transactions shall be allowed only to the extent of the gains from such transactions.” (The legislative history from the Revenue Act of 1934, Sec. 23(g), the predecessor of Sec. 165(d), used the terms “wagering” and “gambling” interchangeably.)

2. IRS Pub. 525, Taxable and Nontaxable Income, p. 31 (2012 Edition).

3. IRS Pub. 529, Miscellaneous Deductions, pp. 12–13 (2012 Ed.). The recordkeeping suggestions listed in this publication merely restate Sec. 3 of Rev. Proc. 77-29, 1977-2 C.B. 538, 1977 WL 42691 (IRS RPR).

4. IRC Sec. 61.

5. However, tax treaties provide the exception to this general rule. For example, the United States has a tax treaty with the Federal Republic of Germany that allows the exclusion of gambling income for German citizens. As such, German nonresident aliens are not subject to U.S. income tax. This fact was demonstrated in 2011 when Pius Heinz, a 22-year old professional poker player from Cologne, Germany, won the World Series of Poker. His $8.72 million winnings were tax free. Reportedly, he refused to take a check or wire transfer and insisted that his winnings be paid in cash.As a result of the large payout, the casino ran out of large denomination bills and eventually had to use $5 and$10 dollar bills in order to complete the transaction.

6. Rev. Rul. 54-339 (1954-2 C.B. 89).

7. Commissioner of Internal Revenue v. Glenshaw Glass Co., 348U. S. 426 (1955); Johnston v. Commissioner of Internal Revenue, 25 T.C. 106 (1955); Umstead v. Commissioner of Internal Revenue,T. C. Memo. 1982-573 (U.S. Tax Ct. 1982); and Commissioner of Internal Revenue v. Groetzinger, 480 U.S. 23 (1987).

8. Bauman v. Commissioner of Internal Revenue, T.C. Memo.1993-112 (U.S. Tax Court 1993). This mistake also resulted in penalties for negligence, failure to file, and failure to pay estimated taxes. The Court held that the tax deficiency was $20,384, and the penalties were $7,417.70— for a total of $27,801.70. In 1988, the only other income Mr. Bauman had totaled $10,574.

9. Carmack et ux. V. Commissioner of Internal Revenue, 183 F. 2d 1 (5th Cir. 1950); Norgaard v. Commissioner of Internal Revenue, 939 F.2d 87 (9th Cir. 1991); and LaPlante v. Commissioner of Internal Revenue, T.C. Memo. 2009-226 (U.S. Tax Ct. 2009).

10. United States v. Scholl, 166 F.3d 964 (9th Cir. 1999); and Shollenberger v. Commissioner of Internal Revenue, T.C. Memo. 2009-306 (U.S. Tax Ct. 2009).

Handle Gambling Definition Synonym

11. Spencer v. Commissioner of Internal Revenue, T.C. Summ.Op. 2006-95 (U.S. Tax Ct. 2006) – a $2,525 deficiency; LaPlante v. Commissioner of Internal Revenue, T.C. Memo.2009-226 (U.S. Tax Ct. 2009)—a $1,808 deficiency; and Shollenberger v. Commissioner of Internal Revenue, T.C. Memo 2009-306 (U.S. Tax Ct. 2009)—a $555 deficiency.

12 Green v. Commissioner of Internal Revenue, 66 T.C. 538 (U.S. Tax Ct. 1976); and Szkirscak v. Commissioner of Internal Revenue, T.C. Memo. 1980-129 (U.S. Tax Ct. 1980).

13. Commissioner of Internal Revenue v. Glenshaw Glass Co., 348 U. S. 426 (1955).

14. Johnston v. Commissioner of Internal Revenue, 25 T.C. 106 (U.S. Tax Ct. 1955); and Shollenberger v. Commissioner of Internal Revenue, T.C. Memo. 2009-306 (U.S. Tax Ct. 2009).

15. Gamblers are typically described as “recreational” or “professional.” Recreational gamblers must separately compute and report their gambling winnings and gambling losses as described in this article. On the other hand, professional gamblers are allowed to compute and report their gambling winnings and gambling losses on Schedule C. Such treatment allows the professional gambler to avoid inflation of his or her adjusted gross income (AGI). Throughout tax literature, the terms “recreational” and “casual” are used interchangeably to describe a non-professional gambler.

This article was previously published in the March/April 2012 edition the EA Journal, a publication of the National Association of Enrolled Agents. Online reprints of the article are available HERE and HERE.

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An Overview Of The Gambling Laws In The State Of Wisconsin

If it were not for the Tribal casinos and the wide ranging compacts with the State allowing the full range of casino games – Wisconsin would be a barren place for gamblers. There are some curious laws here, with pari-mutuel betting legal on-track, except there are no tracks to bet at. You can enjoy lottery and charity bingo games though, and poker players are well looked after on the Indian reservations too. This article gives you a detailed overview of the Wisconsin Gambling laws.

First of all below you’ll find a history and status of gambling in Wisconsin in quick-fire format. Next I have gone through the different forms of gambling and outlined the legal status of each one. After that some more detail is provided, with excerpts from the Wisconsin statutes, plus a legal timeline. At the end of this page you will find summary and a look at possible future scenarios for gambling in this State.

Wisconsin Gambling Laws – A Brief History

When the Wisconsin statutes were created in 1848, the standard stance at the time was anti-gambling. This is the reason we have a blanket ban on all forms of gambling on the books, with only gradual carve-outs for individual types of gambling occurring over the years.

First to be legalized was limited charity gambling, with bingo and raffle type games allowed under these rules. These games are controlled in terms of their frequency and the maximum prizes offered, and require individual licenses. Wisconsin also has an active lottery, which includes inter-State games – though does not offer video lottery terminal games.

Pari-Mutuel betting was late to Wisconsin, not starting until 1987, while many States were enjoying the extra revenue which came from this to build up their horse racing industries since the 1930’s. There were both horse and greyhound racing tracks in this State for many years, however these went into decline, and the last one was closed in 2009. The law now allows betting only at racetracks, only there are no racetracks to bet at any more. There have been attempts to turn the disused racetracks into casinos by some of the native tribes – these have been rejected by the State.

Tribal casinos make up the bulk of the opportunities to legally gamble in Wisconsin. There are 11 tribes, and following the Federal Indian Gaming Regulation Act of 1998, they entered into negotiations with the State. Compacts were signed in 1991 and 1992. These included class 3 games (table games like blackjack and also poker rooms) which allowed the tribes to find investment and build some lavish casino complexes around the State. There have been legal disputes on and off since then, however the compacts remain in place and Indian gaming continues to thrive.

Poker players can enjoy card rooms with up to 50 tables in Wisconsin. Outside of these rooms there are zero legal opportunities to play. Charitable gambling does not include poker, and home-games are not carved out under the statutes – making these illegal, even if nobody is profiting from running the games. While there is regular enforcement activity against illegal gambling, small stakes social home games are definitely not the target.

What Types Of Gambling Are Currently Legal?

Casino Games: Yes, there are 11 tribal casinos in the State of Wisconsin where you can enjoy the full range (class 3) of casino games. There are no commercial (non-tribal) casinos.

Online Casinos: No, as is the norm, the statutes pre-date the internet, though are considered to have broad enough definitions of gambling to cover online casino gambling.

Live Poker: Yes, you can play live poker at the Indian casinos, including tournaments. Home-games are not exempted under Wisconsin laws like they are in other States. While technically speaking your small stakes social game is illegal – enforcement of this kind of game appears very rare.

Online Poker: No, there are no public discussions about the regulation of poker at this time, and this is assumed to be covered by the core statutes at the moment.

Sports Betting: Yes, you can bet on horse races and greyhound races on track – except there are no horse or greyhound races to bet on in this State – a catch-22.

Lottery Betting: Yes, there is a lottery, the games on offer were limited after legal changes in 1992.

Bingo Games: Yes, charity gambling laws cover low-stakes bingo and raffle games.

Wisconsin Gambling Laws – Statutes And Legal Timeline

Though the tribal casinos give residents a lot of gambling opportunities in Wisconsin, without these the place would be pretty quiet for gamblers. The core definition of the Statute, created at a time when gambling was seen as immoral and something to be blanket banned, focuses on the ‘bet’. In addition there are laws against allowing gambling to take place on your property and even entering a gambling location with the intent to make a bet.

Here is the key passage concerning betting:

[su_quote]A bet is a bargain in which the parties agree that, dependent upon chance even though accompanied by some skill, one stands to win or lose something of value specified in the agreement. (From 945.01)[/su_quote]

Note that the chance / skill debate is pre-empted by this quote, making it harder to argue that poker should be exempt. It is possible to make the skill game case, however there will always be an element of chance.

Here is the unusual part of the Wisconsin statutes, entering a venue with the intention of gambling:

[su_quote]Enters or remains in a gambling place with intent to make a bet, to participate in a lottery, or to play a gambling machine;[/su_quote]

Below are some of the key milestones from the legal history of Wisconsin:

1973: Charitable gambling made legal, this includes bingo and raffle type games.

1987: Pari-mutuel betting made legal on horse and greyhound racing. While on-track betting remains legal (including live simulcast betting) there are no longer any racetracks to bet at, with the last one (Dairyland Greyhound Park) closing its doors in 2009.

1988: First lottery tickets sold, after this was signed into law a year earlier. In 1992, the lottery was restricted to pull-tab and scratch-off games and a numbers drawing game which takes place online, limiting the scope for VLTs. 2009 saw Wisconsin join the PowerBall and Mega Millions.

1991 / 1992: Compacts were signed with the 11 tribes wishing to host casinos on their land, these allowed class 3 gaming, which covers all the casino table games as well as slots.

2007: Last known attempt to legislate casino gaming on non-tribal land was vetoed by Governor Kim Doyle.

Wisconsin Gambling Laws – Summary And Key Statutes

There are sporadic attempts to introduce State legislated gambling in Wisconsin, though none of them make it as far as a vote. The status-quo of letting the tribes handle the gambling has been in effect since the 1990’s – and shows no sign of changing any time soon.

I can see no specific reason why Wisconsin would not legislate for intra-State poker should this be a success elsewhere. At the same time it is difficult to see where the drive to do this could come from, despite Indian tribes showing some interest.

Useful Resources:

Handle Gambling Definition Synonyms

Nice Summary / History

• http://legis.wisconsin.gov/lfb/publications/Informational-Papers/Documents/2013/88_Tribal%20Gaming%20in%20Wisconsin.pdf

Handle Gambling Definition Psychology

State Laws Summary

Statutes In Detail

Fun Article On Rubber Duck Racing

• http://www.huffingtonpost.com/2014/02/18/wisconsin-rubber-duck-bill_n_4811340.html