Gamblers are facing a tough challenge in laying the foundation for themselves as professionals in business or trade of gambling. Because let’s face it, most people find gambling for pleasure. There are people who are doing it for profit but historically, taxpayers have had issues in trying to define their occupation.
According to The Supreme Court in Groetzinger, gambling activity may be deemed as a business or trade if it’s pursued as a full-time, with regularity and also, in good faith. Also, if the purpose is to create a steady flow of revenue stream and not just as a form of hobby. To be specific, you can see this in 480 U.S. 23 (1987). In fact in the same line of section 183, it is denying deductions beyond the income derived from activities that aren’t a business or trade engaged for profits. Simply speaking, without the motive for profit.
Separating Casual Gamblers from Professional?
In essence, the cost incurred by a gambler will depend on their tax status either as a professional or a casual gambler. In the latter, they may deduct their losses by using the Form 1040, Itemized Deductions, Schedule A, but to the extent of generating wins and can’t deduct any expenses associated which are basically nondeductible under the Sec. 262. At the same time, casual gamblers are those who frequently gamble for the fun and entertainment of it. Oftentimes, they are also using free £20 with no deposit casino.
With a professional gambler on the other hand, they are more engaged in business or trade of gambling. This gave them the permission to offset any expenses and losses they have when gambling against income from it on Loss or Profit from Business and Schedule.
How a Professional Gambler is Viewed?
One of the primary requirements for being deemed as a professional gambler who is engaged in the business or trade of gambling is the drive for profit as it might effortlessly result to dispute with IRS.
In an effort to identify whether there’s a profit motive or not, all situations and facts with regards to the activity must be taken into consideration.
Besides, there are supporting factors that can determine if profit motive do exists and these are the following:
How the Activity is Executed?
First of all is by assessing how the taxpayer carried on gambling. In the event that they have conducted gambling activities in businesslike fashion similar to keeping records and books, then this can be seen as a profit motive.
Expertise in Gambling
Preparing for any gambling activities through consulting and performing thorough study with professionals can be used as an indication that the person has a motive to generate profit from such activity.