<<I believe losses on schedule C are neither gambling nor investment,
but business losses, which can be carried forward.>>
but business losses, which can be carried forward.>>
This is incorrect. From Tax Help for Gamblers:
"You will not be entitled to all of the Schedule C advantages of taxpayers involved in businesses other than gambling. Schedule C filers normally may carry forward their losses. They can also offset losses against other income. Because IRC 165(d), which we quoted on page 44, takes precedence in determining gambling losses, the professional gambler is at a disadvantage when compared to other businesses. If you sell Amway and fail, you can use the net loss to offset other income. This is not permitted for any gambler, including professionals. As it has in many previous cases, the court ruled again, in Praytor v. Commissioner (2000), that claimed losses, even as a professional, may not exceed gains. That pesky Section 165(d) of the tax code takes precedence."
There IS one new wrinkle in this subject for those who file as professional gamblers. In January of 2011, due to the decision of the Tax Court in Mayo 136 T.C. 81 (2011), the IRS has appeared to acquiesce to the Tax Court in allowing the deduction of non-gambling expenses (like travel, tips, Internet and cell phone usage, etc.) beyond gambling gains. This was a major change of direction by the IRS as they had long held that these non-gambling expenses of professional gamblers were disallowed by 165(d). Now these gamblers can use these deductions to offset non-gambling income, even when it results in a net operating loss. And just like other businesses, that loss can be carried back or forward to other tax years. http://ustaxcourt.gov/InOpHistoric/Mayo.TC.WPD.pdf
One added note: Just because one person has "gotten away" with something on their income tax return – something that is obviously against the clearly stated rules and regulations – that is not information that others should use as a reason to do the same. And even in gray areas where the rules do not cover some areas or they can be interpreted in various ways, one should tread carefully. Each person's circumstances are different and you may not be aware of all the details of another person's situation.
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Jean $¢ott, Frugal Gambler
http://queenofcomps.com/
You can read my blog at
http://jscott.lvablog.com/
Jean $¢ott, Frugal Gambler
http://queenofcomps.com/
You can read my blog at
http://jscott.lvablog.com/
nightoftheiguana2000@yahoo.com wrote:
>correna2 wrote: "I vaguely recall reading somewhere (likely on this message board) that carryover losses can be claimed"
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