I would have loved that IRS memorandum, except for the part that Jean Scott
also noticed: "This advice may not be used or cited as precedent."
As some of you may remember, a couple of years ago I used the "sessions"
method of reporting our gambling income (which is exactly what this memo is
referring to). I was audited, because my "wagering gains" were less than my W2G
totals. For example, on a day where I had hit a $4000 royal and gotten a
$4000 W2G, I also lost $2000 - so I reported a "wagering gain" or "gambling
income" of $2000.
After 6 months of haggling with the IRS wherein they ignored any replies I
sent them (and apparently lost at least 1 letter/return), and contacting a
Taxpayer Advocate, we gave up, and just did it the IRS way of listing a total
for W2Gs as "gambling income" rather than our actual "wagering gain" (or session
gains). The IRS didn't question our losses (they seem to realize that most
gamblers lose more than they win, as unfortunately seems to be the case with
us for almost every year!! argh!).
This resulted in a much higher tax bill than if we had used sessions, but at
least I didn't get an ulcer!
We've been reporting it that way ever since.
This year we once again have a whoppingly large number of W2Gs, and a big
actual gambling loss for the year. Since the W2Gs increase our Adjusted Gross
Income, this ends up causing us to pay more in taxes, even though our actual
gross "income" from gambling is a loss.
I would love to go back to the sessions method - but it just doesn't look
like this Memorandum is of enough use if it cannot be cited as a precedent.
? I just don't know but I do know that my dealings with the IRS last time
were really upsetting.
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