In this third installment of my multi-part series on the One Big Beautiful Bill Act (the “Act”), I discuss a provision of the Act that may not impact a large segment of the population, but which is interesting and worthy of coverage.
Section 70114 of the Act only impacts gamblers. It amends Code Section 165(d).
Background
Over the years, I authored numerous articles about the taxation of gambling. In 1987, I authored a lengthy law review article, The Evolution of the Phrase Trade or Business: Flint v. Stone Trace Company to Commissioner v. Groetzinger – An Analysis with Respect to the Full-Time Gambler and the Investor, 23 Gonzaga Law Review 513 (1987/1988). In that article, I examined, in part, whether a full-time gambler, for tax purposes, is in the trade or business of gambling. If the answer to that question is yes, two results follow (one result that is good and one result that is not so good): (1) the gambler is able to deduct under Section 162 of the Code all of the ordinary, necessary and reasonable expenses incurred in carrying on the business; and (2) the net income of the gambler, if any, is subject to self-employment tax under Section 1401 of the Code.
In 2014, on this blog, I provided a discussion about the taxation of a full-time gambler. In that article, I provided some updates and additional insights on that topic.
A brief overview of the applicable law is necessary for this discussion. Code Section 162(a) generally allows a deduction for "all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business". Code Section 165(d), originally enacted as Section 23(g) of the Revenue Act of 1934, however, provides that "[l]osses from wagering transactions shall be allowed only to the extent of the gains from such transactions."
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Larry J. Brant
Editor
Larry J. Brant is a Shareholder and the Chair of the Tax & Benefits practice group at Foster Garvey, a law firm based out of the Pacific Northwest, with offices in Seattle, Washington; Portland, Oregon; Washington, D.C.; New York, New York, Spokane, Washington; Tulsa, Oklahoma; and Beijing, China. Mr. Brant is licensed to practice in Oregon and Washington. His practice focuses on tax, tax controversy and transactions. Mr. Brant is a past Chair of the Oregon State Bar Taxation Section. He was the long-term Chair of the Oregon Tax Institute, and is currently a member of the Board of Directors of the Portland Tax Forum. Mr. Brant has served as an adjunct professor, teaching corporate taxation, at Northwestern School of Law, Lewis and Clark College. He is an Expert Contributor to Thomson Reuters Checkpoint Catalyst. Mr. Brant is a Fellow in the American College of Tax Counsel. He publishes articles on numerous income tax issues, including Taxation of S Corporations, Reasonable Compensation, Circular 230, Worker Classification, IRC § 1031 Exchanges, Choice of Entity, Entity Tax Classification, and State and Local Taxation. Mr. Brant is a frequent lecturer at local, regional and national tax and business conferences for CPAs and attorneys. He was the 2015 Recipient of the Oregon State Bar Tax Section Award of Merit.
