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Taxation of Gambling Winnings

The essay is about taxation of Gambling Winnings.The purpose of this paper is to investigate the federal taxation of gambling winnings There are several issues which have been raised in relation to taxing the income from gambling, a fact which makes this issue require further analysis and examination.

language english
wordcount 7948 (cca 22 pages)
contextual quality N/A
language level N/A
price free
sources 30
Table of contents

1.0 Introduction. 2
1.1 Statement of Purpose 3
1.2 Scope and imitations of the paper. 4
1.3 Methodology. 5
1.5 Arguments which support gambling. 7
1.6 Arguments against gambling. 8
1.7 Poker gambling in the United States. 9
1.8 Expert opinion in gambling. 10
1.81 Legal definitions in the practice of gambling. 10
1.82 What constitutes gambling 10
1.9 Definition of gambling winnings 10
2.0 How to calculate winnings. 11
2.1 Gambling losses 12
2.2 Substantiating Wins and Losses 13
2.3 Gambling Expenses 14
2.4 Tax policy 14
2.41 Introduction. 14
2.5 Principles of taxation. 15
2.51 Fairness. 16
2.52 Ability to pay 16
2.53 Benefit principle. 16
2.6 Principle of efficiency. 17
2.7 Federal US tax code on gambling winnings. 17
2.71 Taxation of non-resident aliens. 17
2.8 Taxation of US residents. 19
2.9 Tax Treaties. 19
3.0 Effect of taxes on gamblers. 20
3.01 Taxing gambling winnings as income 20
3.02 Deducting gambling losses from taxable income. 20
3.03 Effect of disallowing lumping. 21
3.04 Effect of the requirement that losses may not exceed gains. 21
3.05 Effect of withholding tax on gambling winnings. 22
3.1 Morality of the tax code. 22
3.2 Arguments for taxation of gambling winnings. 23
3.3 Conclusion and recommendations. 24

Preview of the essay: Taxation of Gambling Winnings

The increase in gambling activities in the US and its widespread acceptability as a leisure activity is an issue that is affecting significantly more taxpayers than ever before. According to Hart & Luntz (2004), a 2003 study conducted by the American Gaming Association revealed that 85% of Americans find gambling is perfectly acceptable for others and for themselves. The survey was carried out by respected researchers Peter Hart and Frank Luntz. According to Bell (2003), an analysis of individual income tax returns in 2000 by the IRS revealed that over 1.4 million individuals engaged in gambling, to a tune of approximately $17 billion. This sum includes winnings from horse tracks, casinos, raffle jackpots and lottery. It also included the fair market value of houses, cars among other ...

... have also been seen to increase employment opportunities and revenue collection by the government. This is guided by the several clauses in the relevant laws which provide for taxing gambling winnings as income, deducting gambling losses from taxable income, disallowing lumping, requiring that losses may not exceed gains, and withholding tax on gambling winnings. It can therefore be said that the relevant tax laws present sufficiently cater for the needs of the gambling industry in relation to payment of taxes.
However, in future, new laws need to be passed by the law makers in order to address the dynamic nature of the gambling industry. This should be done after the relevant stakeholders, including the owners of casinos and card rooms, gamblers and the government consult and discuss the best way forward for the gambling industry. This may pave the way for the creation of a law which defines a novice and a professional gambler, and this will enable novices to be exempt from taxation of benefits earned from gambling.
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