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Message: [QUOTE="WEC, post: 1946284, member: 31731"] You can never deduct "roulette/blackjack/dumb table game" loses from your 'ordinary income' in any case. You can only deduct those losses from 'other gambling gains'. If you were declared a professional, you could deduct only your business expenses playing those games, but not from your ordinary income. No matter how you file you can deduct "roulette/blackjack/dumb table game" from any other gambling winnings, including poker, lottery, racetrack, slots, etc [U]From IRS Private Letter[/U] [I]...a casual gambler not engaged in the trade or business of gambling would not have deductible business expenses. The casual gambler’s expenses to engage in gambling are nondeductible personal expenses under § 262. Like any other taxpayer, a gambler has the burden of proving that his activities rise to the level of a trade or business. See Merkin v. Commissioner, T.C. Memo. 2008-146.[/I] [url]http://www.irs.gov/pub/irs-utl/am2008013.pdf[/url] [U]The following formula applies in the examples below.[/U] Schedule C Wagering gains [U]- Wagering losses, as limited by § 165(d)[/U] Wagering income [U]- Business expenses[/U] Business income or loss >>> Form 1040 Business income or loss (Form 1040, line 12) [U]+ Additional income (Form 1040, lines 7-21)[/U] Total Income (Form 1040, line 22) Situation 1. A is a professional gambler engaged in the trade or business of playing poker. Gambling is A’s sole occupation; A is not employed and has no other income. Throughout the year, A traveled to various casinos and other venues where gambling is legal to participate in poker tournaments. At the end of the year, A had total wagering gains of $100,000, total wagering losses of $75,000, and incurred $15,000 in business expenses for transportation, meals and lodging. A must report the $100,000 of wagering gains as gross receipts. Under § 165(d), A may subtract $75,000 of wagering losses from the $100,000 of gross receipts, resulting in $25,000 of wagering income. Under § 162(a)(2), A may then deduct $15,000 in business expenses from the $25,000 of wagering income, resulting in $10,000 of business income. POSTN-139898-08 9 Situation 2. Assume the same facts as Situation 1, except that B also had $10,000 of (taxable) investment income. B must report the $100,000 of wagering gains as gross receipts. Under § 165(d), B may subtract $75,000 of wagering losses from the $100,000 of gross receipts, resulting in $25,000 of wagering income. Under § 162(a)(2), B may then deduct $15,000 in business expenses from the $25,000 of wagering income, resulting in $10,000 of business income. B also must report the $10,000 of investment income as gross income under § 61. B therefore has $20,000 of total income ($10,000 business income + $10,000 investment income). Situation 3. C is a professional gambler engaged in the trade or business of playing poker. Gambling is C’s sole occupation; C is not employed and has no other income. Throughout the year, C traveled to various casinos and other venues where gambling is legal to participate in poker tournaments. At the end of the year, C had total wagering gains of $75,000, total wagering losses of $100,000, and incurred $15,000 in business expenses for transportation, meals and lodging. C must report the $75,000 of wagering gains as gross receipts. Under § 165(d), C may deduct wagering losses to the extent of wagering gains. Therefore, C may subtract only $75,000 of his $100,000 of wagering losses from gross receipts, completely offsetting his $75,000 of gross receipts. C may not carry over the excess $25,000 of (unused) wagering losses to offset wagering gains or other (non-wagering) income in another taxable year. Under § 162(a)(2), C may then deduct the $15,000 business expense without regard to § 165(d), resulting in a net operating loss of $15,000. C may carry that $15,000 net operating loss over or back to another year under § 172(b). POSTN-139898-08 10 Situation 4. Assume the same facts as Situation 3, except that D also had $10,000 of (taxable) investment income. D must report the $75,000 of wagering gains as gross receipts. Under § 165(d), D may deduct wagering losses to the extent of wagering gains. Therefore, D may subtract only $75,000 of his $100,000 of wagering losses from gross receipts, completely offsetting his $75,000 of gross receipts. D may not carry over the excess $25,000 of (unused) wagering losses to offset wagering gains or other (non-wagering) income in another taxable year. Under § 162(a)(2), D may then deduct the $15,000 business expense without regard to § 165(d), resulting in a business loss of $15,000 from gambling. D must also report the $10,000 of investment income as gross income under § 61, resulting is a net operating loss of $5,000 ($10,000 investment income - $15,000 business loss). D may carry this $5,000 net operating loss over or back to another year under § 172(b). [/QUOTE]

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