Taxes on Comps?
I would guess that if you get a free or discounted room from a casino, that you would not have to pay taxes on that. However, what happens if your casino host gives your wife a $1,000 shopping spree at a nearby shopping mall? Or if they comp a whale a free car? Anyone know?
You ARE supposed to itemize them on your tax return.
However, they MIGHT be able to be classified as gambling earning, allowing you to include more of your verifiable losses for a net of zero.
Quote: JIMMYFOCKERNo, comps are completely tax free.
Where do you get your information? I would guess that technically comps are a taxable event, but just not on the radar at low levels. I can assure you that corporations deduct the costs of comps as a business expense. The comp receiver of course would rather consider the comp a 'gift' and not income, but I don't think that a corporation 'gifting' a person money passes the sniff test.
Quote: DJTeddyBearHate to bust your bubble Jerry
Did you call Mr. Focker Jerry? Ooooooohhhhhhh
Quote: DJTeddyBearYou ARE supposed to itemize them on your tax return. However, they MIGHT be able to be classified as gambling earning, allowing you to include more of your verifiable losses for a net of zero.
If this is the case, how many of you report comps on your tax return? Should this be done at all levels of comps? From drinks, to rooms, to food? Or should it be done for bigger gifts, like airfare, trips, suites, gift certificates, cars, etc.?
There was a piece on 60 Minutes a long time ago about the Los Angeles police chief not declaring comps his wife received in Vegas.
Quote: SOOPOOAnother example like this is airline miles you personally accrue while doing business travel paid for by someone else. It is crystal clear that those miles are earned income, but I would guess the number that voluntarily report them is pretty low.
SooPoo:
Actually, the IRS has a real clear IRB on this very subject. Airline miles are NOT considered taxable income. So, if you accrue a million miles, and turn them into airplane tickets, that you use, then you are good to go. If you can convert them into cash, and do so, then that is a taxable event. Many larger corps are collecting all the airline miles for thier benefit now. THey do not go to the employees.
Not like comps. They are to be included in your gambling winnings. To be offset by your gambling losses.
SFB
Quote: SFBSooPoo:
Actually, the IRS has a real clear IRB on this very subject. Airline miles are NOT considered taxable income. So, if you accrue a million miles, and turn them into airplane tickets, that you use, then you are good to go. If you can convert them into cash, and do so, then that is a taxable event. Many larger corps are collecting all the airline miles for thier benefit now. THey do not go to the employees.
Not like comps. They are to be included in your gambling winnings. To be offset by your gambling losses.
SFB
Be absolutely certain to report those buffet comps and free t-shirts from Station Casinos, not!
There is a famous tax court case called Libutti v. Commissioner that is about the taxability of comps, among other things. It is also really interesting as a study of gambling degeneracy.
Quote: teddysAbsolutely comps are taxable. Especially hard comps like cars, cruises, watches, and other stuff whales tend to get. Soft comps are a little harder to determine. But you're gaining income on a hotel room you would have paid for anyway, so it is taxable. I don't know anyone who declares those on their returns though.
There is a famous tax court case called Libutti v. Commissioner that is about the taxability of comps, among other things. It is also really interesting as a study of gambling degeneracy.
Yes, who declares comped rooms on their taxes?
Reevaluate
Just because many people don't declare their comps, and that includes hotel rooms, it doesn't mean that they don't have to.
Quote: DJTeddyBearJerry -
Just because many people don't declare their comps, and that includes hotel rooms, it doesn't mean that they don't have to.
ITA.
If you go to Vegas two three times a year, it doesn't really matter. Your comps are immaterial. And if you got a free hotel room, or a upgrade, or buffett service, you might have to add back $300 to $1,000 per trip.
If you are losing $5,000 to $10,000 per trip, then it just part of your winnings.
It will make a difference if you are audited. OR if you are serious about your gambling, and doing alot of trips. Then your comps are worth serious dollars, in total, and may make a real difference in your taxable income.
When clients come in my office, I ask if they have done any gambling. Then I ask how much. And we go from there. Nobody ever wins.
And if you are gambling for comps, save your gambling money, and just pay for the room.
SFB
The way I would interpret it is anything you received as the result of points earned, a drawing, or a tournament, is taxable. Anything you received as an promotional offer for just showing up would be a gift.
Quote: WizardChapter 3 of Tax Help for Gamblers by Jean Scott and Marissa Chien deals with the topic of taxation of comps. The general rule is that if the player earned or won the comp, it is taxable. If it was a gift, it's not. There is a grey area between what counts as a gift, and what was earned. The book gives examples of gifts and comps earned.
The way I would interpret it is anything you received as the result of points earned, a drawing, or a tournament, is taxable. Anything you received as an promotional offer for just showing up would be a gift.
Gifts! Hmm... Wizard, thanks. It seems that gifts (i.e., Harrah's weekly free room offers) are a loophole for the income tax purpose, and that IRS cannot tax the gamblers on the gifts of free rooms. Great! Now I understand why IRS did not bother to tax Bobby LiButti on his comped-rooms ... even though IRS taxed Bobby on the rest of his comps such as these:
Quote: WizardI don't know much about that case. However, the IRS probably correctly thought that such comps went beyond reasonable gift giving, and were actually earned somehow.
If you add up those comps for the three years, you get $2,545,126. That is TAXABLE income. I can imagine what his gambling losses were.... Gotta be in the 10's of millions.
A hotel mailing you a "free room" offer isn't "Comp'ing" you a room. They are making an offer. Same a McDonalds mailing you a coupon for $1 off a Big Mac. Its is an inducement.
Now, if you go to LV, book a room, and you lose some money, then they give you upgrades and vouchers, you have taxable "comps" that is the difference.
When you are THERE, its more likely to be taxable. Trying to GET YOU THERE, is advertising. That is the big difference.
SFB
Quote: SFBIf you add up those comps for the three years, you get $2,545,126. That is TAXABLE income. I can imagine what his gambling losses were.... Gotta be in the 10's of millions.
A hotel mailing you a "free room" offer isn't "Comp'ing" you a room. They are making an offer. Same a McDonalds mailing you a coupon for $1 off a Big Mac. Its is an inducement.
Now, if you go to LV, book a room, and you lose some money, then they give you upgrades and vouchers, you have taxable "comps" that is the difference.
When you are THERE, its more likely to be taxable. Trying to GET YOU THERE, is advertising. That is the big difference.
SFB
SFB, I'm with you on "Inducement" "not "comp'ing", as long as there's a reason basis for me to minimize my tax liability; however, lets' play a game of devil's advocate...knowing IRS will screw you for more taxes anyway it can. Anyway if I were IRS, I would use "Substance over Form Doctrine" to tax the gamblers for free rooms. While gamblers call the free-room-offers an "Inducement", IRS calls them comps! That's why Tax Courts are pretty busy nowadays to settle disputes among IRS and gamblers such as in these comp-tax cases:
LaPlante v. Commissioner
Merkin v. Commissioner
