Who is a Professional Gambler? - John R. Dundon II, Enrolled Agent
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Who is a Professional Gambler?

Who is a Professional Gambler?

In the Tax Court case of Trieu M. Le, et ux. v. Commissioner
TC Summary Opinion 2010-94 the IRS took the position that the taxpayer was a casual gambler and should have deducted his losses up to his winnings on Schedule A.  The taxpayer took the position that he was a professional gambler and accounted for all activity on Schedule C.

The Tax Court found in this case that the taxpayer’s gambling activity was a trade or business because it was pursued with regularity and for the production of income. He gambled every weekend and on legal holidays when he was not working his ‘day job.’ Furthermore the taxpayer drove great distances to casinos starting Friday afternoon and gambled late into the night. Then he gambled all day Saturday and Sunday before returning home Monday morning. He spent just as much time gambling during the weekend as he did at his ‘regular’ job during the week. Like a dedicated professional he wagered everything he owned in an attempt to win more than he invested. There was nothing casual or superficial about his gambling activity. He had an actual and honest documented profit objective. He used his best judgment and successfully tested his business approach. The fact that his approach was ultimately unsuccessful does not make it irrational.

This is where I get confused, profit motive and business approach aside the taxpayer was still entering an industry where it has been statistically proven that the odds of being successful ultimately favor the casinos thus making the deck stacked against any business model or profit objective. Over time the profits most always wind up in the hands of the casinos making ANY gambling business model irrational in my personal opinion, unless of course the business model incorporates owning and running a casino.

The Tax Court in this case concluded that the taxpayer was engaged in the trade or business of gambling; therefore, his gambling losses are not itemized deductions on Schedule A. As a result, he has no income tax deficiency and is not liable for an
accuracy-related penalty.