Comments on: Ask the taxgirl: Illegal Gambling Losses http://www.taxgirl.com/ask-the-taxgirl-illegal-gambling-losses/ Paying taxes is painful... but reading about them shouldn't be. Sat, 21 Nov 2009 20:16:58 -0500 http://wordpress.org/?v=2.8.6 hourly 1 By: stuart http://www.taxgirl.com/ask-the-taxgirl-illegal-gambling-losses/comment-page-1/#comment-8462 stuart Fri, 23 Jan 2009 14:51:37 +0000 http://www.taxgirl.com/?p=2354#comment-8462 Change your luck by not gambling. Change your luck by not gambling.

]]> By: Kelly http://www.taxgirl.com/ask-the-taxgirl-illegal-gambling-losses/comment-page-1/#comment-8433 Kelly Thu, 22 Jan 2009 20:30:04 +0000 http://www.taxgirl.com/?p=2354#comment-8433 To follow up on my last comment, here is the specific statute referencing drug sales: § 280E. Expenditures in connection with the illegal sale of drugs No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted. -- There's just a crazy level of specificity in the Code re drugs - mainly, I think, so that it can be used as an alternative weapon on the war on drugs. But that's a policy discussion for another day! To follow up on my last comment, here is the specific statute referencing drug sales:

§ 280E. Expenditures in connection with the illegal sale of drugs
No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted.

–

There’s just a crazy level of specificity in the Code re drugs – mainly, I think, so that it can be used as an alternative weapon on the war on drugs. But that’s a policy discussion for another day!

]]> By: Kelly http://www.taxgirl.com/ask-the-taxgirl-illegal-gambling-losses/comment-page-1/#comment-8429 Kelly Thu, 22 Jan 2009 18:04:36 +0000 http://www.taxgirl.com/?p=2354#comment-8429 I think there's a distinction to be made with the drug dealer, cause there's a whole lotta illegal going on there from start to finish. That said, I am not sure whether it's permissible or not. I've searched and searched and while it's clear, as indicated above, that losses are deductible, I didn't see anything that distinguished illegal gambling losses (though I agree that, generally speaking, illegal activity such as making a bribe is not deductible). There are a number of gambling sites (not surprisingly) that argue that it is deductible, but with no real support. If anyone has a reference, that would be great. I think there’s a distinction to be made with the drug dealer, cause there’s a whole lotta illegal going on there from start to finish.
That said, I am not sure whether it’s permissible or not. I’ve searched and searched and while it’s clear, as indicated above, that losses are deductible, I didn’t see anything that distinguished illegal gambling losses (though I agree that, generally speaking, illegal activity such as making a bribe is not deductible). There are a number of gambling sites (not surprisingly) that argue that it is deductible, but with no real support. If anyone has a reference, that would be great.

]]> By: T-Bone http://www.taxgirl.com/ask-the-taxgirl-illegal-gambling-losses/comment-page-1/#comment-8428 T-Bone Thu, 22 Jan 2009 17:07:00 +0000 http://www.taxgirl.com/?p=2354#comment-8428 I though illegal gambling losses were not deductibe against any type of winning, legal or illegal. Just as a drug dealer's revenue is taxable, but he gets no deduction for cost of goods sold. Correct? I though illegal gambling losses were not deductibe against any type of winning, legal or illegal. Just as a drug dealer’s revenue is taxable, but he gets no deduction for cost of goods sold. Correct?

]]>