vpFREE2 Forums

Tax question number 1,565,876

#1

I believe that the simplest way to avoid the tax problem is to minimize W2-Gs even when using the same volume of coin-in and with the same expected value (EV). For instance, play 100P JOB 5-cent (@ $25 per hand) or 10P JOB 50-cent (@ $25 per hand) - instead of single line JOB $5 (@ $25 per hand). Much less likely to generate a W2-G in either of the first two cases because even 5 royals on 100P 5-cent or one royal on 10P 50-cent will not be over $1K - but the results are statistically the same. In this example, on multi-line play, only a dealt SF or royal will generate a W2-G. Much less likely to occur for the same volume of play.

Walter H

In a message dated 3/23/2019 2:33:34 PM Central Standard Time, vpF…@…com writes:

···

Another issue, say you win $10,000 one year and lose $5,000 the next two years. You just broke even, the $10,000 that first year was just dumb luck. But you get to pay taxes on the phantom $10,000 gain but get no carry forward losses on your losing years (like you would in stocks or cryptocurrency for example). Gambling losses cannot be used to offset other gains and cannot be carried forward to other years. After taxes you are actually a loser instead of the breakeven you thought you had. One way around this problem, to some degree, is to make sure you play at least Nzero (variance/edge/edge) hands per year, at least you substantially reduce this no loss carry forward penalty for gambling. At Nzero hands your odds of winning are about 84% with a 16% chance of losing (even though you have a “long term” edge). Dunbar generated a table of Nzero values at west-point.org/users/usma1955/20228/V/Bank_NO1.htm

#2

If only wagers were “scalable” at most venues. Unfortunately, strong plays tend to be available at a very restricted selection of denoms.

—In vpF…@…com, <walterhnri@…> wrote :

I believe that the simplest way to avoid the tax problem is to minimize W2-Gs even when using the same volume of coin-in and with the same expected value (EV). For instance, play 100P JOB 5-cent (@ $25 per hand) or 10P JOB 50-cent (@ $25 per hand) - instead of single line JOB $5 (@ $25 per hand). Much less likely to generate a W2-G in either of the first two cases because even 5 royals on 100P 5-cent or one royal on 10P 50-cent will not be over $1K - but the results are statistically the same. In this example, on multi-line play, only a dealt SF or royal will generate a W2-G. Much less likely to occur for the same volume of play.

Walter H

In a message dated 3/23/2019 2:33:34 PM Central Standard Time, vpF…@…com writes:

···

Another issue, say you win $10,000 one year and lose $5,000 the next two years. You just broke even, the $10,000 that first year was just dumb luck. But you get to pay taxes on the phantom $10,000 gain but get no carry forward losses on your losing years (like you would in stocks or cryptocurrency for example). Gambling losses cannot be used to offset other gains and cannot be carried forward to other years. After taxes you are actually a loser instead of the breakeven you thought you had. One way around this problem, to some degree, is to make sure you play at least Nzero (variance/edge/edge) hands per year, at least you substantially reduce this no loss carry forward penalty for gambling. At Nzero hands your odds of winning are about 84% with a 16% chance of losing (even though you have a “long term” edge). Dunbar generated a table of Nzero values at west-point.org/users/usma1955/20228/V/Bank_NO1.htm

#3

Technically this strategy does not work because we are REQUIRED to report ALL gambling income, not just the jackpots reported on W-2G’s. So if you are on a lower denomination play with the same EV in real $$'s, your reportable income would average out to the same as is it would playing the higher denomination.

If you read the W-2G carefully it does not state that it is a report of actual income, only a report of “winnings”. The IRS “sessions” memo (can be found in the files section of vpFREE) supports this interpretation of what a W-2G represents.

I wonder what happens in the situation where both spouses in a marriage(filing jointly) are professional gamblers filing Schedule C’s. That describes our household. Fortunately neither of us has yet had a losing year. We do combine our Schedule C incomes on the 1040. Will the IRS allow us to report only the net? I’m hoping I never discover the answer.

G’luck all,

Gamb00ler

walterhnri wrote :

I believe that the simplest way to avoid the tax problem is to minimize W2-Gs even when using the same volume of coin-in and with the same expected value (EV). For instance, play 100P JOB 5-cent (@ $25 per hand) or 10P JOB 50-cent (@ $25 per hand) - instead of single line JOB $5 (@ $25 per hand). Much less likely to generate a W2-G in either of the first two cases because even 5 royals on 100P 5-cent or one royal on 10P 50-cent will not be over $1K - but the results are statistically the same. In this example, on multi-line play, only a dealt SF or royal will generate a W2-G. Much less likely to occur for the same volume of play.