Craps at the movies With dynamic action, built-in tension and unpredictable outcomes, it's no surprise that craps is one of the movie maker's favourite casino games. From slick heist movies to tense psychological thrillers, craps is a regular on our screens. Editor’s note: A version of this post previously ran in September 2016. We believe it’s an important topic worth revisiting. Every day, I seem to have a discussion with someone regarding strategies for sustaining retirement income in a lower-return world. Investors, particularly retirees, are.
The Tax Court held in a memorandum decision released Monday that taxpayers who were casual gamblers recognized wins or losses when they redeemed their tokens and that they could not net their wins and losses across the year (Shollenberger, TC Memo 2009-306).
In this decision, the court accepted the IRS’ methodology for determining wagering gains and losses, which the Office of Chief Counsel put forth in a legal memorandum in 2008 (AM 2008-011).
The taxpayers in the case were a married couple who gambled occasionally at a casino in the small town of Charles Town, W.Va. On March 29, 2005, the husband hit a $2,000 jackpot at a dollar slot machine. The couple continued gambling and lost $400 from the jackpot; they left the casino that day with $1,600 in winnings. They did not report any gambling income on their tax return for 2005, and the IRS issued a deficiency notice for $2,000 in unreported gambling winnings.
IRC § 165(d) states that “losses from wagering transactions shall be allowed only to the extent of the gains from such transactions” but does not provide a technical definition of the terms “gains” and “losses.” As AM 2008-011 explains, the term “transactions” in section 165(d) could mean every single play in a game of chance or every wager made. That interpretation would require a taxpayer to calculate the gain or loss on every transaction separately and treat every play or wager as a taxable event and also to trace and recompute the basis through all transactions to calculate the result of each play or wager.
The Method Casino Income For Life Free
Because that method would be “unduly burdensome,” the IRS legal memo allows a casual gambler to recognize a wagering gain or loss at the time he or she redeems tokens.
At trial, the IRS conceded that under that method, the taxpayers should have reported $1,100 in gambling winnings rather than the $2,000 in the deficiency notice. According to the court, the lesser amount would be calculated as follows: $2,000 in jackpot winnings minus $500 in wagering money originally brought into the casino by the taxpayers minus the $400 lost by the taxpayers after the jackpot that day.
The taxpayers argued that they should be allowed to offset their gambling winnings with $2,264 of other gambling losses that they claimed to have incurred in 2005. Because section 165(d) uses the term “transactions,” the court held that the taxpayers could not net their gains and losses throughout the year. Instead, the court accepted the IRS’ treatment of transactions as occurring when the gambler cashes in his or her tokens at the end of play and held the taxpayers to have $1,100 of unreported gross income for the year.
According to the court, to allow the taxpayers to net gains and losses throughout the year would defeat the purpose of IRC § 63, under which losses of casual gamblers are allowable only as itemized deductions.
For more on IRS legal memorandum AM 2008-011, see Beavers, “IRS Issues Guidance on Determining Wagering Gains and Losses,” 40 The Tax Adviser 129 (February 2009).
| Flamingo Resort, Inc. v. United States | |
|---|---|
| Court | United States Court of Appeals for the Ninth Circuit |
| Full case name | Flamingo Resort, Inc. v. United States of America |
| Argued | October 5, 1981 |
| Decided | January 7, 1982 |
| Citation(s) | 664 F.2d1387; 82-1 USTC (CCH) ¶ 9136 |
| Court membership | |
| Judge(s) sitting | Joseph Tyree Sneed III, Thomas Tang, Harry Pregerson |
| Case opinions | |
| Majority | Sneed, joined by Tang, Pregerson |
| Laws applied | |
| Internal Revenue Code | |
Flamingo Resort, Inc. v. United States, 664 F.2d 1387 (9th Cir. 1982),[1] was a case decided before the United States Court of Appeals for the Ninth Circuit that decided the question of when the right to receive income represented by 'markers', or gambling credit lines, become 'fixed' for tax purposes based on the 'all events' test.
Facts[edit]
The Flamingo Resort, a Las Vegascasino, routinely extended lines of credit to some of its customers in order to help facilitate gambling in the casino. Customers would sign 'markers' which represented their liability for the amount loaned. The Flamingo Resort successfully collected on those receivables at rates as high as 96%. On its 1967 tax return, the casino, an accrual basis taxpayer, excluded $676,432.00 of receivables attributable to uncollected loans from 'markers' issued. The Commissioner of the Internal Revenue Service required the accrual of this income.
Issue[edit]
The issue in this case was whether the right to receive income from the 'markers' was 'fixed' for accrual purposes when the 'markers' were first extended or if the right was not 'fixed' until the casino collected on the loans.
Holding[edit]
The Court of Appeals affirmed the holding of the lower court, holding that the right to receive income was sufficiently 'fixed' when the credit was extended and therefore required the casino to include the $676,432.00 in dispute on their 1967 tax return.
Reasoning[edit]
The Court began by defining the test which governs the timing for reporting income of accrual basis taxpayers, which is the 'all events' test. The 'all events' test requires, in relevant part, that income be included in gross income 'when all the events have occurred which fix the right to receive such income.'[2] The casino argued that the right to receive income from the 'markers' was not 'fixed' because Nevada does not recognize a legal obligation for customers to pay gambling debts of this sort. The Court explicitly rejected the casino's reliance on H. Liebes & Co. v. Commissioner,[3] holding that this case did not require that there must be a legal liability to pay the debt, only that the obligation be 'fixed' and there be a 'reasonable expectancy' that the obligation would be collected.
The Court found that the casino had a 'reasonable expectancy' that the 'marker' obligations would be converted into cash since the casino itself estimated it collected at a rate as high as 96% on the 'markers' issued. The lack of a legally enforceable right against the customers was not controlling and such a right is not necessary in order for the right to the income to be fixed. Therefore, the court held that the casino's right to the income was 'fixed' for accrual purposes and that the 'markers' must be accrued when issued.
The Method Casino Income For Life Download
Importance[edit]
The Method Casino Income For Life Scam
The Internal Revenue Service followed the holding of this case with Revenue Ruling 83-106 which held that an accrual method casino is required to include in income all gambling revenue originating from extensions of credit in the year in which the gambling obligations arise. This is important because it makes clear that a right to income can be fixed for purposes of the 'all events' test of accrual method taxpayers without there being a legally enforceable right to the income. It is sufficient for there to be a reasonable expectation of collecting on the obligation. This prevents casinos from being able to defer income into later taxable years simply by running much of their play on credit lines.
The Method Casino Income For Life Center
Notes[edit]
- ^Flamingo Resort, Inc. v. United States, 664 F.2d 1387 (9th Cir. 1982). This article incorporates public domain material from this U.S government document.
- ^Treas. Reg. Section 1.451-1(a).
- ^H. Liebes & Co. v. Commissioner, 90 F.2d 932 (9th Cir. 1937).
Casino Income For Life The Method
External links[edit]
- Text of Flamingo Resort, Inc. v. United States, 664 F.2d 1387 (9th Cir. 1982) is available from: CourtListenerGoogle ScholarJustiaOpenJurist