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 virtual casino) 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 makes his bet. 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.
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 For more gambling strategy tips by Mark, check out the Deal Me In index page