How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask William Ellis, CPA Your Own Question
William Ellis, CPA
William Ellis, CPA, CPA
Category: Tax
Satisfied Customers: 296
Experience:  Over 15 years of experience in public accounting
Type Your Tax Question Here...
William Ellis, CPA is online now
A new question is answered every 9 seconds

If I have about 500,000 in slot machine winnings, but of course

Customer Question

If I have about 500,000 in slot machine winnings, but of course I don't have any of those winnings as they all get reinvested in the machines as you go, what will I have to pay in federal tax. It says slot machines can be exempt?
Submitted: 5 years ago.
Category: Tax
Expert:  Richard replied 5 years ago.

Good morning. Regulation 1.165-10 provides that gambling losses sustained during the tax year on wagering transactions are deductible only to the extent of gains from such transactions. That means that you cannot claim losses beyond what you have
wagered. What constitutes a transaction is addressed by the IRS in a Chief Counsel Memorandum. An example in that Memorandum provides as illustration a taxpayer who went to a casino to play the slot machines ten times during the tax year, each time purchasing $100 worth of tokens. On five
occasions, the taxpayer lost the entire $100 in tokens. On the other five
occasions, the taxpayer redeemed tokens for $20, $70, $150, $200, and $300.
Discussing the results of various court decisions, the IRS notes that attempting
to trace and recompute basis after each play would be unduly burdensome and
unreasonable. The fluctuating wins and losses during the taxpayers casino stay
are not accessions to wealth until the taxpayer redeems her tokens to
definitively calculate the amount above or below basis (the amount of the
original bet) that has been realized. Thus gain or loss may be calculated over a
series of separate plays or wagers.

I hope this has given you
information that has been helpful to you. If the information seems more general
than specific, please be aware that we are only allowed to provide information
and not specific advice.
If you have a follow-up question, please
remember that there might be a delay between your follow up questions and my
answers because I may be helping others or taking a break.
If you need additional clarification on this question, please do not
hesitate to click Reply and I will be happy to do what I can to help you
further. Thanks for allowing me to be of service to you. Please be aware that
the information provided here is not legal advice. Rather it is simply general
information. All states have intricacies in their laws and
any information given is simply information only and specifically is not
intended to be, nor does it constitute, legal advice. This communication does
not establish an attorney-client relationship with you. I hope this answer has
been helpful to you.

Customer: replied 5 years ago.
Ok, to be more specific. According to the casino to date, I wagered $1,571,508. My coin out was $1,186,579. I had jackpots of $311,000. They say this means I have an overall loss of around $73,000. I only have social security which amounts to about $7,000 a year. Where did I get the money to gamble? Well, I wrote checks and covered the checks with my winnings. But that was barely doable. Anyway, I really didn't make any money, but am I going to have to pay taxes on a huge amount. I did have them do some withholding as I went. Haven't added that up yet.
Customer: replied 5 years ago.
Relist: Incomplete answer.
Let me be more specific. I have no income other than 7,000 a year social security. I am single, head of household. I wagered (coin in) over 1,510,000. in slot machine play. I won about $310, 000 in jackpots. I did this by writing huge checks which I then covered with the jacepots. Overall, I lost money. I had then hold out to date about $50.000 in taxes. I am wondering if this is going to cover my federal taxes or will I owe more? I do not always use my card to play, so their stats from the casino are not accurate anyway. Where am I at for owing?
Expert:  William Ellis, CPA replied 5 years ago.

Hello and thank you for allowing us at Just Answer to assist you. Sounds like you could qualify as a professional gambler. If this is the case, you would show all of your gambling winnings and losses on Sch C. You can still only claim the losses to the extent of your winnings.


But, because of a recent tax court case, you can claim some additional expenses such as travel or automobile as expenses. You should not owe any taxes, and you will get the $50 back.





William Ellis, CPA, CPA
Category: Tax
Satisfied Customers: 296
Experience: Over 15 years of experience in public accounting
William Ellis, CPA and 2 other Tax Specialists are ready to help you