This is the gambling tax article by law professor, Bryan Camp, that Druff pulled off the internet:
https://www.taxnotes.com/special-rep...25/08/14/7sxhn
In this article Camp discusses the Bonaparte vs. Commissioner tax court decision in 2019. Here is the pertinent part:
4. TAX COURT OPINIONS
The Tax Court has wrestled with the concept of session in several cases and has not arrived at a consistent definition. However, from reading the various Tax Court opinions in recent years, I conclude that the Tax Court may be receptive to a “per-establishment” approach. This approach ties the concept of session to wins and losses at specific locations over the entire year and not just to a single 24-hour period. This idea recognizes that a gambler may visit multiple locations during the year and develop a record of wins and losses at each location. Unlike the Shollenbergers, who wanted to net all activities from all locations over the course of an entire year, this approach nets only activities at a single location over an entire year. This approach anchors the relevant session to the statutory period of the tax year rather than forcing the concept into the Procrustean bed of an arbitrary 24-hour period.9
Under this per-establishment method, taxpayers would be able to use net losses for the year at one establishment as the section 165(d) deduction against net gains (if any) from another establishment.
Support for this idea comes from Boneparte and Bright. The former is a memorandum opinion by Judge Richard T. Morrison; the latter is a bench opinion by Judge Ronald L. Buch Jr.
In Boneparte the taxpayer gambled at 14 separate casinos in 2013. On his return he took the position that he was a professional gambler. He thus reported his gambling activity on Schedule C, on which he reported wagering gains of $18,000. He reported total non-wagering “business expenses” of $89,000.12 The IRS did not dispute the $18,000 of gains, naturally. But it disallowed all of the claimed losses, finding that James Boneparte was not a professional gambler.
Morrison agreed that Boneparte was not a professional gambler. Still, he would be entitled to deduct losses from wagering transactions against gains from wagering transactions on Schedule A.
To prove his losses, Boneparte submitted annual statements from each of the 14 casinos where he gambled. Every single annual statement showed a net loss for the year, adding up to a net loss of $15,000.
Morrison accepted these per-establishment annual records as evidence of net wagering losses. The IRS insisted that only the net losses of $15,000 could be deducted against the reported $18,000 of wagering gains. The Tax Court explained why the IRS was wrong:
The 14 casino statements include the amounts of both (1) gains from wagering transactions for which there was a gain and (2) losses from wagering transactions for which there was a loss. Therefore the aggregate loss . . . equals the gains from wagering transactions for which there is a gain minus the losses from wagering transactions for which there was a loss. It is not, as the IRS assumes, just the losses from wagering transactions for which there was a loss."
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The second case is Bright vs. Commissioner 2023:
Camp wrote:
Like Morrison in Boneparte, Buch took a per-establishment approach in the Bright case. That case also illustrates how a per-establishment approach can be tricky. In 2019 Jacob Bright gambled mostly at three casinos: Mystic Lake, Treasure Island Minnesota, and Diamond Jo Worth. At each casino, he almost always used a player card. That allowed him to get reports from each of the three casinos for his annual play activity. On his 2019 return, he reported about $241,000 of wagering gains and an equal amount of losses. However, he did not keep strong daily contemporaneous records that would support a per-transaction approach. When audited, the IRS accepted his self-reported income but disallowed all the losses for lack of substantiation (of course).
What saved Bright was his player card records. Buch allowed Bright to introduce reports of his player card activity from each of the three casinos he gambled at in 2019. All three reports showed Bright to be a net loser.
But each casino’s annual report reported different information. Mystic Lake reported player activity monthly and reported only whether the player’s account reflected a net loss or a net gain for the month. Treasure Island reported only the net annual activity and broke it down by source: slots or the pit area. However, unlike the other two casinos, it also reported the dollars Bright spent in each area through his player card. Those would be his wagers. Finally, Diamond Jo, like Treasure Island, reported only the net annual activity. It apparently solely tracked Bright’s slot machine play this way and did not report his wagers, just his yearly net.
Because each casino’s report gave different information, Buch did a careful analysis of each casino’s information to determine the amounts of yearly net gains and losses within each casino. He concluded that Bright incurred about $191,000 in losses. The important point here is that Buch used this per-establishment method, allowing the taxpayer to do a yearly netting for activities at each separate establishment."
And Camp also wrote about the language in the One Big Beautiful Bill that supports the yearly session method:
While the media has focused on the 10 percent haircut in section 165(d)(1)(A), I ask readers to instead focus on the new language in section 165(d)(1)(B). I believe this language helps taxpayers address the netting problem.
The new language in section 165(d)(1)(B) supports the idea of a yearly session. Recall that the original language in section 165(d) provided only that “losses from wagering transactions shall be allowed only to the extent of the gains from such transactions.” The CCA focused on the plural (“transactions” and not “transaction”) to conclude the statute permitted some netting. The CCA came up with the concept of “session.” The problem was figuring out the boundaries of permissible netting. The IRS came up with an impractical one-day rule. The Tax Court has tentatively approved a more workable yearly per-establishment rule.
The new language in section 165(d) strongly supports the Tax Court’s tentative approach. It now explicitly tells us that losses from wagering transactions “shall be allowed only to the extent of the gains from such transactions during such taxable year” (emphasis added). Do you see the path forward? To know the limit, a taxpayer must now determine their “gains from [wagering] transactions during [the] taxable year.” If a taxpayer has zero “gains from [wagering] transactions during [the] taxable year” then their losses from wagering transactions are not deductible against any other income. That is indeed the purpose of the limitation — to prevent taxpayers from deducting personal expenses against their income."
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Bonaparte and Bright have now set precedents on 1) using one year as a session per establishment, 2) using casino win/loss statements as proof of win/loss. Using one year sessions per casino is huge for professional gamblers. It has major repercussions which I will show in a later post. As for using win/loss statements one could use them for backup but I think it would be wise to keep a contemporaneous logbook.
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Maybe a third on a holiday weekend or a very special week like is upcoming with CES in town, the single largest convention of the year.
