Casual Gambler Can Net Wins Against Losses on a Per Visit Basis

by David & Mary Mellem, EAs

We all know gambling winnings are Other Income, while gambling losses are deductible on Schedule A but only up to the amount of winnings. Some tax professionals have interpreted the regulations to require each individual bet to stand on its own. Now IRS has addressed this issue a little more.

This Chief Counsel Advice (CCA), numbered EMISC 2008-011, from December 12, 2008, addresses the question: How does a casual gambler determine wagering gains and losses from slot machine play?

    Facts presented: X, a casual gambler, visited the casino 10 times during the year. Each time X committed only $100 to slot machine play. She would exchange her $100 for slot machine tokens. She did not use cash, credit, or player’s cards to gamble. At the end of the visit X would redeem any remaining tokens for cash. Five visits resulted in entire losses of the $100s. The other five visits resulted in the following amounts of cash: $20, $70, $150, $200, and $300.

IRS position: X can net each visit because X has not accumulated any wealth until she redeems her tokens.

As such, X has five losses of $100, plus losses of $80 ($100 less $20 cash out) and $30 ($100 less $70 cash out).

X has three wins of $50, $100, and $200 (the cash outs less the original $100 starting amount each of these three visits).

Therefore X has gambling winnings (income) of $350 to report and gambling losses of $610 which are limited to $350 (the amount of gambling winnings).

Editor comments: Does this mean if the tokens were taken home instead of being cashed out that X would be able to net the entire year? (We don’t think IRS would be this liberal.) The CCA specifically states X does not use cash, credit, or player’s cards. Does this mean if these items were used instead of tokens that each bet stands on its own?

Need help with a Federal tax issue? Ashwaubenon Tax Professionals (David & Mary) offer a fee based consulting services.

This text has been shared with you courtesy of: David & Mary Mellem, EAs & Ashwaubenon Tax Professionals, 920-496-1065 (fax 920-496-9111),,, and

©2009 Ashwaubenon Tax Professionals. No reproduction of this article is permitted without the express consent of Ashwaubenon Tax Professionals, 2140 Holmgren Way, Suite 1040, Green Bay, WI 54304.

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