Professional Gambler Folds in Tax Court Business Expense Case


Posted: March 20, 2014

Updated: October 4, 2017

A professional gambler bet wrong in tax court when arguing that sportsbook takeout expenses should be written off business expenses.

The enterprising CPA likes to frequently bet on sports in the US and tried to avoid paying tax on sportbook takeout expenses, claiming them as business expenses.

The case was taken against the IRS in the Tax Court and the gambler argued that the portion of his wagers attributable to the “takeout” were deductible without limitation.

Bettors usually take 15 – 20% of all betas placed on a particular event as a takeout. This covers operational costs and losses to payouts; the percentage also serves as profits if the full amount if not used.

The taxpayer posed that he was paying the operating expenses of the track, with the track acting as a conduit by collecting the takeout and using the funds. Officials ruled that the takeouts class as gambling losses and that tax is still required to be paid on them.

Gambling taxation

US tax courts have repeatedly shot this theory down, holding that even a professional gambler may only deduct losses to the extent of gains. Under US gambling laws only gains from gambling activities are deductible – not losses.

The court stated that the pursuer is ultimately responsible for his share of the payroll taxes.

They ruled that at no point are the expenses of the track imposed on the individual bettor and are always obligations of the track. The tracks use of the takeout to pay its expenses does not discharge any obligation of the bettor.

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