• Gambling Losses Tax Deductible Canada 2020
• Gambling Losses Tax Deductible Canada 2019
• Gambling Losses Tax Deductible Canada Tax
• Gambling Losses Tax Deductible Canada Income

UK Aquatic Imports Forum - Member Profile Profile Page. User: Gambling losses tax deductible canada, gambling losses tax deduction limit, Title: New Member, About: Gambling losses tax deductible canada  . As an example, let’s say that in a given year you went gambling twice, winning $6,000 in one instance, but losing $8,000 in another. In this case, you can only deduct $6,000 from that $8,000 loss. You may deduct gambling losses only if you itemize your deductions on Schedule A (Form 1040 or 1040-SR) PDF and kept a record of your winnings and losses. The amount of losses you deduct can't be more than the amount of gambling income you reported on your return.

In Canada gambling income is not generally taxable. If the gambling activity can be considered as a hobby, the income is not taxable. If the gambling is carried out in businesslike behaviour, then the income is taxable and losses deductible.

Many taxpayers who report gambling winnings and losses don’t maintain satisfactory records of their gambling activity. Page 12 of this IRS publication states:

You must keep an accurate diary or similar record of your losses and winnings. Your diary should contain at least the following information:

• The date and type of your specific wager or wagering activity.
• The name and address or location of the gambling establishment.
• The names of other persons present with you at the gambling establishment.
• The amount(s) you won or lost.

The publication goes on to provide types of sufficient documentation specific to the type of wagering activity.

As I’ve said before, the amount of detail asked from the IRS in this regard is excessive. If you merely present that excuse to the IRS, however, you will likely lose every time. Alternatively, taxpayers conjure up various methods to prove the amount of gambling losses reported on their tax return is accurate.

The method employed by William Jones in his recent U.S. Tax Court case came up very short.

Mr. Jones regularly played slots in Chicagoland area casinos during 2006. Jones didn’t file a tax return that year. Instead, the IRS prepared a substitute return for him, and assessed a tax deficiency. Although not entirely clear from the court’s opinion, let’s presume this deficiency was based upon $7,000 in gambling winnings reported to the IRS on multiple Form W-2Gs.

Jones contended that he also had gambling losses from the tax year of approximately $7,000. A predictable response from the IRS: OK, prove to us your gambling losses.

Instead of showing any sort of contemporaneous diary of his gambling activity, Jones presented his bank account statements, which showed a balance of $7,531 on December 31, 2005, and a balance of $947 on December 31, 2006. Jones testified that most of his withdrawals from the account was spent on gambling. The taxpayer’s theory was “that his losses must have approximately equaled the difference between his beginning-of-year and end-of-year bank account balances.”

Nice try, but that ain’t gonna fly. Decision in favor of the IRS.

In some instances, however, the court may estimate the amount of a deduction that the taxpayer is entitled to. To make this estimation, the court requires a basis upon which to make it. This doctrine is known as the Cohan rule. One example exhibiting application of the Cohan rule to gambling losses was in the case Doffin v. Commissioner, T.C. Memo. 1991-114.

Mr. Doffin compulsively engaged in pulltab gambling. Unsurprisingly, Doffin mightily struggled with his finances, so his parents arranged for his paychecks to be deposited with a credit counseling service. Mr. Doffin pretty much gambled away whatever allowance he received. Because the court was presented with a very detailed description of the taxpayer’s lifestyle and financial position, the court was able to approximate the taxpayer’s gambling losses.

Had Mr. Jones read the Doffin decision, perhaps his Tax Court case would have turned out differently.

Rules concerning income tax and gambling vary internationally.

Gambling Losses Tax Deductible Canada 2020

United States[edit]

In the United States, gambling wins are taxable.

The Internal Revenue Code contains a specific provision regulating income-tax deductions of gambling losses. Under Section 165(d) of the Internal Revenue Code, losses from “wagering transactions” may be deducted to the extent of gains from gambling activities.^[1] Essentially, in order to qualify for a deduction of losses from wagering, the taxpayer can only deduct up to the amount of gains he or she accrued from wagering. In Commissioner v. Groetzinger, the Supreme Court Justice Blackmun alludes to Section 165(d) which was a legislative attempt to close the door on suspected abuse of gambling loss deductions.^[2]

Wagering Transaction[edit]

The Internal Revenue Service has ruled that a “wagering transaction” consists of three elements.^[3] First, the transaction must involve a prize. Second, the element of chance must be present. Finally, the taxpayer must give some consideration.

Section 165(d) and Professional Gamblers[edit]

In Bathalter v. Commissioner, a full-time horse-race gambler had gains of $91,000 and losses of $87,000.^[4] The taxpayer deducted the expenses under Section 162.^[5] The service argued that Section 165(d) precluded the taxpayer from engaging in gambling as a 'trade or business.'^[4] The Tax Court held that the taxpayer's gambling was a business activity and allowed the deductions.^[6] In essence, the court held that Section 165(d) only applies when a taxpayer is at a loss instead of a net gain and “serves to prevent the [taxpayer] from using that loss to offset other income.” ^[7] However, if the taxpayer has a net gain, as the horse-race gambler did, then the taxpayer may deduct the expenses under Section 162, and Section 165(d) does not apply.^[8]

Gambling Losses Tax Deductible Canada 2019

Section 165(d) and Recreational Gamblers[edit]

In addition, in Valenti v. Commissioner, the court reiterated that Section 165(d) applies to professional gamblers as well as recreational gamblers.^[9] The court stated, '... it has been held both by this Court and various courts of appeals that wagering losses cannot be deducted, except to the extent of the taxpayer's gains from wagering activities, and it has been so held even where such activities were conducted as a trade or business as opposed to a hobby.'^[10] Therefore, for example, if a recreational gambler visits a casino one Saturday and accumulates $600 of losses and $200 of gains, that recreational gambler may deduct $200 of the wagering losses (because she can only deduct an amount up to the amount of wagering gains she accrued).

United Kingdom[edit]

In the United Kingdom, wins (unless in the course of a trade) are not taxable and losses are not deductible.

Germany[edit]

In Germany, wins are taxable since July 2012 by 5% of the winnings (profit).

Canada[edit]

Gambling Losses Tax Deductible Canada Tax

In Canada gambling income is not generally taxable. If the gambling activity can be considered as a hobby, the income is not taxable.^[11][12]

Gambling Losses Tax Deductible Canada Income

If the gambling is carried out in businesslike behaviour, then the income is taxable and losses deductible. Making approximately $50 million in sports lottery bets and earning a profit of $5 million was not considered businesslike behaviour in Leblanc v. The Queen. However, in the case of Luprypa v. The Queen the gambling income was ruled to be taxable. The case involved a skilled pool player that profited approximately $1000 per week playing staked pool games against bar patrons.^[12]

Poker differs from many other forms of gambling as skilled players may increase their chances of winning significantly. In the case Cohen v. The Queen judge ruled that the gambling activities were not conducted in sufficiently businesslike manner and thus the losses were not deductible.^[12]

See also[edit]

References[edit]

1. ^IRC Section 165(d).
2. ^480 U.S. 23, 32 (1987).
3. ^Technical Advice Memorandum 200417004.
4. ^ ^abT.C. Memo 1987-530.
5. ^IRC Section 162.
6. ^Id.
7. ^Id.
8. ^Id.
9. ^T.C. Memo 1994-483.
10. ^Id.
11. ^Bonusfinder Canada. 'Do I need to pay taxes on my casino winnings?'. www.bonus.ca. Retrieved 24 February 2020.
12. ^ ^abcRotfleisch, David. 'Taxation Of Gambling And Poker Winnings – A Toronto Tax Lawyer Guide'. mondaq.com. Retrieved 24 February 2020.