In Tschetschot v. Commissioner, 93 TCM 914 (2007), the tax court ruled that taxpayer’s losses from participating in tournament poker were limited to the amount of her winnings. The court held that tournament poker is, despite its differences from other types of poker, essentially a wagering activity and therefore should not be treated differently from other forms of gambling for tax purposes. The court also rejected the taxpayer’s equal protection argument to treat tournament poker as sports, on the basis of the policy decisions of the congress to treat business based on wagering activities differently.
Introduction
Gambling is becoming increasingly popular in today’s society. Major casinos and online gambling sites attract countless people who are lured by the fortune, fascinated by the chance, and entertained by the excitement offered by gambling. With the popularity on the rise, the skills of professional gamblers as well as the form of organizing gambling activities also evolve, and various gambling tournaments emerge as a result. Tournament poker, in particular, is probably the most well known and widely participated one. Numerous tournaments are held, either in casinos or online, and professional players gain celebrity status as the games are televised and watched by people from all over the world.
Tournament poker, different from “live-action” poker normally played in casinos or elsewhere, consists of a series of individual events. Each participant pay an entrance fee to the organizer of the tournament, and the collective amount is used to administrate the event and form the prize “pot” that will be ultimately paid to the winners. Generally each participant begins with a same number of chips and plays with others. A player cannot exit halfway through the game until he or she has lost all of his or her chips, and the tournament ends when there is one player left with all of the chips.
The organization of the tournament, however, also raised
References: Tschetschot v. Commissioner, 93 TCM 914 (2007) 26 U.S.C. §165 Commissioner v. Groetzinger, 480 U.S. 23 (1987) Mayo v. Commissioner, 136 T.C. 81