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Federal Income Tax Lottery & Gambling Tax

Can Gambling Losses be Deducted as Casualty Losses?

If a taxpayer cannot deduct gambling losses given the restrictions on gambling losses, can they deduct them as casualty losses instead? What if the gambling loss are attributable to prescription medications known to cause compulsive gambling? The court addresses this in Mancini v. Commissioner, T.C. Memo. 2019-16. Facts & Procedural History The taxpayer diagnosed with […]

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Federal Income Tax Lottery & Gambling Retirement Accounts Tax

For Early IRA Distribution, Compulsive Gambling Not a Disability

Early distributions from IRAs are subject to a 10 percent additional tax.  The 10 percent additional tax does not apply if the distribution is taken when the IRA owner is disabled.  The recent Gillette v. Commissioner, T.C. Memo. 2018-195, case addresses whether medically-induced compulsive gambling qualifies as a disability. The Facts & Procedural History The taxpayer-wife is a […]

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Federal Income Tax Lottery & Gambling Tax

Opting Out of Gaming Industry Tip Compliance

The IRS often challenges the amount of income received by workers who are paid tips.  The IRS’s Gaming Industry Tip Compliance Agreement Program (“GITCA Program”) provides a method for avoiding these disputes.  But what happens if you opt out of the tip program?  The Sabolic v. Commissioner, T.C. Memo. 2015-32, case provides the answer. The Facts & […]

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Federal Income Tax International Tax Lottery & Gambling Tax

Tax on Nonresident Alien Gambling Winnings

Are non-resident aliens who receive gambling winnings while visiting the U.S. able to deduct the gambling expenses incurred in earning the gambling winnings? And can they avoid the withholding tax on their gambling winnings? The court addresses these issues in Park v. Commissioner, 136 T.C. 569 (T.C. 2011). Facts & Procedural History The taxpayers are […]

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Federal Income Tax Lottery & Gambling Tax

Yet Another Lottery-Related Tax Question

Here is yet another lottery-related tax question: Does a state lottery have to withhold tax from lotto winnings if a single taxpayer wins more than one lottery prize from the same lotto ticket where the total winnings exceed $5,000, but the individual winnings do not exceed $5,000? In PLR 132947-06-2007, the IRS recently held that […]

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Capital vs. Ordinary Federal Income Tax Lottery & Gambling Tax

Sale of Lottery Payments, Capital or Ordinary?

While lottery winnings may be subject to tax at ordinary tax rates, what about the sale of the right to receive annual lottery payouts?  The court addressed this in Prebola v. Commissioner, T.C. Memo 2006-240. Facts & Procedural History The taxpayer won $17.5 million from the lottery.  She selected the annual installment option, which would pay out […]