100% Payback Machines Strategy

After filing my taxes and finding myself in a new tax bracket my accountant informed me I needed other deductions to reduce the amount I owe in taxes. My accountant said that I could start a business. So here is my thought for starting a business. I find myself at the casino 3 to 4 times a week, primarily playing video poker. If I concentrate my play on 100% payback machines offered at all of the station casino properties then over the course of time I should have winning years and losing years, but importantly for a business that is reported to the IRS it needs to be profitable some years otherwise it will not be considered a valid entity recognized by the IRS.

Therefore, if I am willing to take the time and effort to create the journal, which needs to be very detailed with dates, times, game number of the machine, cash in/cash out, and documenting miles and time of play, just to be complete, then I should be able to receive the appropriate write offs.

What I am asking the forum though is about determining the length of play for any given session. Here are my options:

Game: $0.25 Deuces Wild (Payback just over 100%):
Session Play Option #1: Play for 1 hour regardless of win or loss and then stop after 1 hour.
Session Play Option #2: Play 1000 hands regardless of win or loss amount.
Session Play Option #3: Play $500 through the machine then quit, which equals 625 hands then quit.
Session Play Option #4: Play until either I lose $250 or until I hit 4 deuces or a royal flush.

Or any other suggested session play options are welcome.

Do whichever will be fastest so you don't hog the machine and therefore get the machine taken out of service. Your comp rate usually goes way down at VP and even further down if you are a VP-hogger much less an exclusive VP-hogger.

Hire me I will play for you @ Palace Station since I live down the street from there.

Stations gives no comps on the 100%+ machines.

Your deductions on gambling can only be claimed up to your winnings.

Quote: Triplell

Your deductions on gambling can only be claimed up to your winnings.

Not if you file schedule C as a pro gambler. You can deduct expenses as well.

There has to be better ways to get a deduction than this. So are you looking to lose money on the business or just claim a lot of business expenses on a business that makes only a few dollars? I say find a better accountant!

My company is already in this line of work: VP Degenerate Incorporated.
I welcome the competition!

Quote: SONBP2

After filing my taxes and finding myself in a new tax bracket my accountant informed me I needed other deductions to reduce the amount I owe in taxes.

Suppose you have an AGI of $225k and no gambling records. You just need to find other deductions on that $225k. If you gamble $500 * 4x/week * 50 weeks = $100k/year in handle. If you break even, you still have 50k in winnings offset by 50k in losses. Now your AGI is $275k and deductions of 50k + gambling expenses (how much are those?) Ask your accountant whether it's a good idea to inflate your AGI by that much in order to chase some deductions.

On the other hand, $100k/year in handle should get you good treatment at most casinos. You may find that by reporting your gambling activities, you realize the value of the comps is actually profitable for you -- and that defeats the purpose of looking for deductions. Note: I'm assuming that if a casino gives a professional gambler a gift worth $100, that's equivalent to $100 in income and therefore must be reported as such, but I'm not a tax expert. Ask your accountant.

I think you would have a better chance if you wrote a book on gambling. As long as you show an intent to be profitable, you can deduct an office at home and mileage to and from casinos, perhaps even lodging and meals if you conduct interviews. And I can only echo ME's great advice " Ask your accountant."

I would be filing as a professional gambler and therefore those expenses would be deductible. I know there are other deductions out there, but for several reasons I am not in a position to take advantage of them, the deductions don't apply to me. I am not in a position to buy a home because of credit issues primarily stemming from a student loan. I had 9 student loans with a bank, I put 8 of the student loans in deferment, but for some reason the 9th loan for $35k was never put in deferment and was turned over to collections. Now the only way to get it out of collections is to pay the amount in full even though I have an increasing payment arrangement and have made payments for the last two years. My wife and I don't have time for children at this point in our lives, so that deduction is out. Pretty much our spare time is spent on hiking with our dogs, a dinner and movie at one of the station casinos, and some gambling. We live close to Red Rock so we eat out a couple times a week and gamble for an hour after dinner.

I have went over with my accountant most of the standard deductions that would apply to most people. As stated before, I am a local attorney, but just starting out, so I find myself in a new tax bracket, but 25% of my income goes directly to student loans, so I am not living on easy street either. Therefore, my accountant recommended starting a hobby or side business. I really don't have time for a lot of other things as law takes up most of my free time. So, I was thinking about the gambling thing. If I could get basically break even from the gambling and have deductions of about $2500-$5000 it would help.

So back to the original question: How should I divide my individual sessions if I plan to go this route?

Game: $0.25 Deuces Wild (Payback just over 100%):
Session Play Option #1: Play for 1 hour regardless of win or loss and then stop after 1 hour.
Session Play Option #2: Play 1000 hands regardless of win or loss amount.
Session Play Option #3: Play $500 through the machine then quit, which equals 625 hands then quit.
Session Play Option #4: Play until either I lose $250 or until I hit 4 deuces or a royal flush.

Thanks for the previous comments.

" Therefore, my accountant recommended starting a hobby or side business. " Really ? Hobbies are not tax deductible and the IRS has strict rules on the difference between hobbies and a business!

Quote: buzzpaff

" Therefore, my accountant recommended starting a hobby or side business. " Really ? Hobbies are not tax deductible and the IRS has strict rules on the difference between hobbies and a business!

Yes you are correct, misstatement on my part. She asked do I have a hobby? I said gambling. She said sometimes a hobby can actually be determined to be a business. Reference, a man had a hobby creating arrows, but actually he spent a lot of money making arrows and designing them. He sold them at hunting shows and he made a small profit. She told him it was not a hobby and could be claimed as a business with deductions for travel to the shows, fees associated with the shows, and some of the travel costs and so on. You are correct, sorry for the misstatement.

I suggest against the gambling route. You're expenses will be tax deductible, but unless you could somehow make up expenses...you are still going to be paying that money.

You're basically asking "How do I get out of paying my taxes"...the simple answer is you can't. You could try to be a AP, at the risk of getting audited...

Quote: SONBP2

If I could get basically break even from the gambling and have deductions of about $2500-$5000 it would help.

I'm guessing you're in the 28% bracket, so having an extra $5000 means earning an extra $6945. I think that'd be easier and far less time-consuming for you than mucking with gambling records and going through all those filings. I understand where your accountant is coming from, but if I were an attorney (and I really do wish I had gone to law school when I had the opportunity), I'd focus on expanding my practice rather than trying to nickel-and-dime the IRS on the back-end. Look to the top line and the bottom line will take care of itself.

My recommendation is to hire a new accountant.

$5,000 in income deductions will save you what, $1,500 in taxes at the highest bracket? For the amount of recordkeeping and the value of your time, you're much better off to advertise and get some extra billing hours, or perhaps pay your wife for some expenses and record some deductions there. If you're a "professional gambler", you will need to show some profit at some point in time, and you will likely be questioned by the IRS on how you can be a professional gambler and a lawyer at the same time.

I'm just thinking that, even as a lawyer starting out, you can make alot more money by doing more wills or real estate transactions on the side rather than hope to earn $10.00/hour by grinding out some VP. You're going to be in the higher tax bracket anyway!

Quote: boymimbo

I'm just thinking that, even as a lawyer starting out, you can make alot more money by doing more wills or real estate transactions on the side rather than hope to earn $10.00/hour by grinding out some VP. You're going to be in the higher tax bracket anyway!

More to the point, if you're not in the higher tax bracket, you should be. If I were an attorney in Vegas who was intimately familiar with playing machine games, I'd be looking for ways to leverage that knowledge to better my business. What kind of niche can you carve out that combines aspects of gambling with legal representation? Player vs. casino disputes, maybe? I've worked on a few of those: casinos are usually very eager to settle such disputes so it wouldn't involve much trial time either.

Hmm...I don't know if gambling is the best use of your time, even at 100.76% payback. Maybe bill a few extra hours and make it so you don't have to worry about those extra taxes.

Otherwise, if you like investing, find some investments you can make. Those are also easy to lose :)

Are you maxed out on your 401K ?

Quote: JohnnyQ

Are you maxed out on your 401K ?

I work for a small office, no 401k offered. VP is just what I do in my free time. Obviously it is not the best write-off in the world, but there are few deductions I can take based on my current situation.

Does any one have an opinion on how to divide my sessions if this is something I plan to do?

Thanks for all the advice. I do appreciate it. I do focus on my business as much as possible. I am trying to focus primarily on business law so if I am not in the office I am having meeting with small business owners trying to help them grow their business, reviewing contracts for them, and offering other legal advice as needed.

I must have some very wrong assumptions on the tax system.

1) I didn't think you could file for professional gambler unless that was your main source of income. It sounds like you make a lot doing something else and then do some VP on the side.

2) You can break off the gambling into its own entity, but at that point I didn't think losses in that entity could be applied to your other income as losses.

I will stick with my original suggestion, write a book on gambling. Include a few chapter on the legal side, like what to say when backed off, trespassing statutes, etc. Of course you would also have to research casino games, interview dealers, etc. You do not have to own a home to take a home office deduction.

You can title it " Law and Order Casino Edition" Think of all the free publicity you will get when the TV series sues you. Just remember that old saying about a lawyer who defends himself. LOL

Quote: soulhunt79

1) I didn't think you could file for professional gambler unless that was your main source of income. It sounds like you make a lot doing something else and then do some VP on the side.

I believe this is correct that a substantial percentage of your income must come from gambling. A professional gambler must also pay the 15% self employment tax on the income.

Quote: buzzpaff

I will stick with my original suggestion, write a book on gambling. Include a few chapter on the legal side, like what to say when backed off, trespassing statutes, etc. Of course you would also have to research casino games, interview dealers, etc. You do not have to own a home to take a home office deduction.

You can title it " Law and Order Casino Edition" Think of all the free publicity you will get when the TV series sues you. Just remember that old saying about a lawyer who defends himself. LOL

I do like this idea. Maybe it is something I will work on. Thanks for the advice.

Quote:

Game: $0.25 Deuces Wild (Payback just over 100%):
Session Play Option #1: Play for 1 hour regardless of win or loss and then stop after 1 hour.
Session Play Option #2: Play 1000 hands regardless of win or loss amount.
Session Play Option #3: Play $500 through the machine then quit, which equals 625 hands then quit.
Session Play Option #4: Play until either I lose $250 or until I hit 4 deuces or a royal flush.

Everyone else is answering whether or not it's a valuable use of your time or whether or not your accountant is competent. I'll answer because it sounds like you're going to play regardless.

When I play I usually set aside time I can afford to play, usually calculated in points.

"I have time to play 1000 points, 1500 points, etc."

Sometimes I have a need to play a certain number of points, like for a promotion, so that is the measure, perhaps broken up over a period of time.

The single-session result really doesn't matter to me because it's all just one long session anyway.

Your options 1, 2, and 3 are really the same thing, just using a different measuring stick. On full-pay deuces, you can't use option 4 unless you have LOTS of time to play. Both of the results in the session measurement, at the length of session you're describing in the other three options, are extreme. You could reasonably expect to sit there all day and not hit either end. Deuces and Royals should eventually come, as will the days that the PRNG doesn't give you anything and sucks $250 in an hour or so, but they're the exception after only 1000 hands (the longest of the sessions in your choices 1, 2, and 3).

Get Video Poker for Winners. It can help you visualize all this. And if you end up filing a Schedule C, it should be deductible. :)

Quote: DRich2

I believe this is correct that a substantial percentage of your income must come from gambling. A professional gambler must also pay the 15% self employment tax on the income.

In fact the case where Professional Gambling was ruled to be a trade or business for a professional gambler came when an old gambler, trying to get his Social Security benefit up started claiming gambling as his business and paying into Social Security. The IRS howled and disallowed the idea that gambling was a trade or business but the old gambler prevailed and could receive social security benefits based off his gambling profits.

MHO/ Buy 1000 shares of ATT and reinvest the dividends. Thank me later. /MHO