Tax Question

[Checkers]

WATCHING THE WORLD SERIES OF POKER LAST NITE ON THE TRAVEL CHANNEL GOT ME WONDERING


THE GUY WHO WON EARNED $1.5 MILLION

SUPPOSE HE TAKES THAT DOUGH AND IMMEDIATELY GOES TO ANOTHER CASINO TO PLAY 21 AND LOSES IT ALL

DOES HE HAVE TO PAY INCOME TAX ON THE $1.5 MIL? OR IS HE CONSIDERED 'EVEN' FOR THE DAY AND OWES NO TAX?

[Blowfish]

Hey Checkers, long time no see!

I THINK you would not be handed a true $1.5 million check. The casinos are required to withhold (any contest is if you win above a certain amount) the appropriate tax on the winnings.

The same goes for winning on Wheel of Fortune or Jeopardy--they are going to hold back a certain amount.

So you could win the World Series of Poker, cash your check (which would be for the amount less the tax paid) and go blow it all, but you're not going to get a tax refund.

[STEVE TURNER]

Blowfish, you can get a refund. Most casino's hold State taxes on big jack pot winnings. They will ask you if you want federal tax with held.

The person who won the World Series of Poker would have Federal tax probably withheld, but when you file a tax return on gambling winnings, you may deduct gambling losses for the same year.

I also keep lottery ticket receipts, markers from casinos and the works to show losses if Feds every say I had big winning year in gambling. Also any Casino you have gambled at would be able to furnish you a year to date record of winnings or losses.

Again, you can subtract gambling losses from gambling winnings. You can not subtract any more losses than winnings.

[Te tutava nei matou]

i saw that show


they paid the winner $1.5M in cash

[stardust]

The late Billy Baxter did just that - won 1 million in the WSOP and blew it during the year. He told the IRS that if money was meant to be held onto, it would have handles.

As I understand it, he won in tax court.

[Dragon]

When did Baxter die? He just won a tournament.

http://www.pokerpages.com/tournament/result5270.htm

Me thinks he's still alive.

[Blowfish]

There seem to be several people dying lately that aren't really dead. Didn't Buzz Daly say someone was dead last week who wasn't?

[pack rats1]

most casinos tax it up front.

[freefallin]

the cash giving ceremony could be a publicity thing. i thought they were required to take taxes out.

[JPet]

The explanation here is really quite simple. It really has to do with a CALENDAR year period.

Net tax winnings over a calendar year period are taxed as ordinary income.

Net tax losses over a calendar year period are not tax deductible.

Three senarios will help to explain ( assume these are your only gambling activities for the entire year(s) ).

1. Dec 1, 2001 win $1.5M, Dec 15, 2001 lose $1.5M. CY2001 taxable gambling income = $ 0.

2. Dec 1, 2001 win $1.5M, Dec 15, 2001 lose $1.0M. CY2001 taxable gambling income = $1.0M

3. Dec 31, 2001 win $1.5 M, Jan 1, 2002 lose $1.5M.

CY2001 taxable gambling income = $1.5M
CY2002 taxable gambling income = $ 0 and no deduction !!!

[stardust]

Dragon,

I guess I was misinformed . . . although I saw a Poker piece with Bob Stupak playing someone and they toasted Billy Baxter (like they were toasting his memory) like he was gone. Casts doubt on the tax story as well I guess.

[HotPants]

JPet,

I'm confused with your #2 scenario.

If you win $1.5 million in 2001 and lose $1 million of it in 2001 then you should only be taxed on $500,000---because gambling losses can be deducted up to gambling winnings. so you've offset all but half a mil with the million dollar loss.