Allen visits Reno, Nevada, once a year to gamble. This year his gambling Critical Thinking loss was $25,000. He commented to you, "At least I didn't have to pay for my airfare and hotel room. The casino paid that because I am such a good customer. That was worth at least $3,000." What are the relevant tax issues for Allen?

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2 August, 16:31

Allen visits Reno, Nevada, once a year to gamble. This year his gambling Critical Thinking loss was $25,000. He commented to you, "At least I didn't have to pay for my airfare and hotel room. The casino paid that because I am such a good customer. That was worth at least $3,000." What are the relevant tax issues for Allen?

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Isabel Brennan · Answer 1

The answer is: If Allen is a professional gambler, he can use his gambling losses to offset the income from his gambling activities.

Explanation:

We can consider the airfare and hotel expenses as income part of Allen's income (+$3,000) but since he lost more money in the casino (-$25,000), the net effect is an economic loss (-$22,000).

That economic loss isn't tax deductible unless he was a professional gambler, then he could offset his income by $22,000.