Dear Mark, This week Newsweek reported that former Education Secretary
William Bennett lost eight million dollars over a decade in Las Vegas and
Atlantic City. Even with those huge losses, would Mr. Bennett have any tax
liability on his winnings? Dave T.
Oh, yeah. Under the current scrutiny of his $8,000,000 pocket-change
play, his p.d. (post disclosure) political life may well depend on Mr.
Bennett's proper honoring of that liability, by virtue of, ALL casino
wins are taxable.
In a statement released Monday, Bennett said, "It is true that I have
gambled large sums of money. I have also complied with all laws on
reporting wins and losses." Assuming that the dropped eight million is a
net loss, i.e. losses minus winnings, which by law must all be declared
as income, he's in the clear with the IRS, though maybe not elsewhere.
He also stated, "When I win, I usually give at least a chunk of it away
(to charity). I report everything to the IRS." You don't see what I walk
away with," Bennett says. "They (the casinos) don't want you to see it."
How's that again? Seems like when you're in a hole, you should stop
digging. Now, I could have a field day with those statements, but I will
grudgingly confine my efforts to your question's underlying issue: Taxes
on his "unknown" winnings.
If he did his virtuous duty, the former Education Secretary (an obvious
truant from Gambling 101, and only very modestly qualified as a lecturer
on morality) offset his gambling losses by the amount of his winnings on
Schedule A as an Other Miscellaneous Deduction, but only to the extent
of his gambling wins, not income from his highfalutin' rhetoric on the
Stygian depths to which we moral lepers have sunk, nor on the royalties
on his Bookie of Virtues.
Okay, I took a shot. But you note, Dave, that I forbore to home in on
this plump target of opportunity, offering just a little light-hearted
humor instead. Painful decision, I'll admit.
Gambling winnings are reported on tax form 1040 on the Other Income
Line. Reportable gambling winnings can come from lotteries, bingo,
raffles, horse and dog racing, mud-wrestling, and all casino games,
including those $500 slot machines where Mr. Bennett hangs his halo.
A loss-claimant, like Mr. Bennett, must substantiate his loss claims
with a flawlessly documented, descriptive gambling diary. That is done
by keeping on hand all wagering tickets, canceled checks, bank
withdrawal statements made at the casino, and credit receipts as
necessary proof.
Also, gambling losses can be used only to counterbalance gambling
winnings during that same tax period. They cannot be carried forward or
back to any other tax year.
Dear Mark, While playing a friendly game of Hold'em with friends, a
player called out his hand as a flush instead of the straight flush it
was. I had a full house, enough to beat a flush, but not a straight
flush. My friend believed he still gets the pot even if he miscalled his
hand. I don't. Who's right? Alex C.
At a kitchen-table game, the enforceable statutes on such matters should
be Hoyle; but let's face it, we've all sat in on games where the rules
are based on whose house we're in, or who bought the beer. As for casino
Hold'em games, the iron rule is that "cards speak." Your poker hand is
what it is, regardless of how you call or miscall it.
When the cards go face up, the dealer will call the hands and award the
pot to the player who actually has the best hand, even if, like your
friend, the player were to miscall it.
Gambling quote of the week: "Things such as air quality, noise
levels, sound patterns, colors, graphics, and aromas were identified as
having dramatic influences on player behavior." - Jerry L.
Patterson, Casino Gambling
