Has anyone who lives in a state which taxes gross (or adjusted
gross) income tried filing federally as a professional gambler to
avoid being unfairly taxed by the state?
Aside from record keeping issues and behaving like a legitimate
trade or business, one issue I am warry of relates to reporting as
a "professional gambler" on a Schedule C. Such professional
gambling income is shown as business income on the first page of
form 1040. If my slots playing spouse had gambling losses how would
these be netted against my "trade or business" gambling net
winnings. [Could hardly say slots play is a trade or business.]
Based upon applicable case law and regulations, her wagering losses
should be allowed as a deduction against my vp income, however as
the two types of play flow to different lines in the return, I have
little desire to contest the deductiblity of slot losses agains vp
winnings at tax court, especially if otherwise itemizing deductions.
Therfore the only saving would be to avoid unfair state taxation,
and it my not be worth the risk of incuring potential federal
liabiliy where none existed w/o filing as a trade of business. Does
anyone have specific guidence from the IRS in this area?
David