Help me out with the new wagering IRS rules

[Socalman3]

There should not be anything personal in any of this stuff - the arguments and issues going on are larger than any person.  I do not really care about the politics of the change - I care more about either fighting the change or adapting to the change.

What is really frustrating to me is that by considering personalities and politics, we get distracted from what is actually happening.  The truth is the one thing we all on this board can agree on is that we love horseracing and care about its future.  That much we should all be able to agree to.

So let\'s focus on the threat to the thing we love. It is new tax.  It seems there are only three possible responses  - (a) fight the change and hope to succeed, (b) accept the change and then adapt to the new world (for me, this means only playing in a format that leaves no record, or only playing tournaments), or (c) put your head in the sand and then both you and the sport get runover by the steamroller at some point.

If we want the industry to survive, it seems like the industry needs to do either (a) or (b) (and work with its players to survive in the new world).  Unfortunately, it looks like (c) is what is happening (and is the default of neither (a) nor (b) are pursued).  

A long time ago, there were studies about the impact of take out on handle - and the studies showed that if you reduce the percentage of take, your gross take, in absolute terms, goes up.  This is because of churn. If you give bettors back dollars instead of pulling them out of circulation, the bettors rebet those dollars and you get multiple attempts to take stuff out.  The studies showed that churn was the really important factor. In real life terms, compare betting Superfectas at place that takes 30% out of the Superfecta pool with betting pick 5s with a 15% take. The difference is dramatic.  There is no question what is sustainable and what is not. this new tax is going to dramatically reduce churn. This new tax is an absolute assault on churn.  If I were a racetrack operator, I would be messing my pants because of what this does to churn.

Here is an example, lets say you bet $10,000 to show on prohibitive favorites in races with a negative show pool.  Say you do this 20 times in a year, and lets say you go 19 for 20.  In this scenario, you have cashed for $199,500 on wagers of $200,000.  By most sane standards, you lost $500. Also, you don\'t really need a bankroll of $200,000 to bet the $200,000. In the worst case scenario - you lose you first bet and win the others, you only needed a bankroll of $20,000 to have a handle of $200,000 (see, the magic of churn).

Here is the problem -- according to the IRS, you won $199,500 and then you are allowed to deduct only 90% of your losses.  What are you losses here?  it is the single $10,000 bet you lost.  So you won $199,500, you lost $10,000 but you are only allowed to deduct 90% of that or $9,000.  According to the IRS, you owe tax on $190,500.  At 30%, that means your tax bill is $57,150.  Yes, in this scenario, you lost $500 on handle of $200,000 and you owe the IRS $57,150.

Would love to understand why my example is wrong.  Would also love to know why racetracks think this is okay and that their horseplayers will keep coming back for this sort of punishment.

[Tavasco]

Socalman3 Wrote:
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Your points about churn are valid imho but there is not an intelligence pre-requisite  for lawmakers so we end up with stupid laws and regulations.

 (b) accept the change and then
> adapt to the new world (for me, this means only
> playing in a format that leaves no record, or only
> playing tournaments

I want to add technically it is the taxpayers responsibility to report winnings from gambling. Whether it came from a tournament or live at the track.

Yet regarding ADW\'s only U.S. based ADW\'s are required to provide W-2\'s. Offshore ADW\'s have no such requirement and do not. I repeat - do not report winnings which are available in crypto and can be anonymous as well as accessed via VPN.

Wondering how many of us can expect EOY W-2\'for our 2025 action?

[Socalman3]

Tavasco Wrote:
-------------------------------------------------------
> Socalman3 Wrote:
> --------------------------------------------------
> -----
> Your points about churn are valid imho but there
> is not an intelligence pre-requisite  for
> lawmakers so we end up with stupid laws and
> regulations.
>
>  (b) accept the change and then
> > adapt to the new world (for me, this means only
> > playing in a format that leaves no record, or
> only
> > playing tournaments
>
> I want to add technically it is the taxpayers
> responsibility to report winnings from gambling.
> Whether it came from a tournament or live at the
> track.
>
> Yet regarding ADW\'s only U.S. based ADW\'s are
> required to provide W-2\'s. Offshore ADW\'s have no
> such requirement and do not. I repeat - do not
> report winnings which are available in crypto and
> can be anonymous as well as accessed via VPN.
>
> Wondering how many of us can expect EOY W-2\'for
> our 2025 action?

I wouldn\'t expect anything for 2025 action as the new rules will only apply for 2026.

The reason to play tournaments is that it will dramatically reduce \"Gambling Winnings\" not that you should not report something.  If you play feeders for the BCBC or the NHC - you don\'t win any money....you win an entry to another tournament - at the NHC, you only have winnings if you cash in the end.  For the BCBC, you churn for the whole breeders cup...your \"winnings\" are not your cashes but what is net left in your account at the end. I only plan to play feeders into the largest tournaments and only very large tournaments.  My handle will go way down and so will my cashes. My potential tax bill will be minimized.  The big loser from this is going to be the tracks - they will lose the money in their handle from me and players like me.

I will bet untraceable live cash at racetracks/casinos - but becuase I need to be physically present, my action will be way lower than it is when I am betting in Living Room Downs.  Again, the tracks are the big loser here.

[Gerard]

A W-2g or 5754 would not be triggered in this string\'s scenario as both the $600.00 winning wager and a 300x profit on the amount wagered needed to trigger the filing are not met. The player would then be left on his honor to report net (proceeds minus cost basis) winnings on Schedule 1 of their return. Professional players are either smart enough on their own or have someone in the employ to navigate Schedule C.

So we are still left with the ten percent hangover on net winnings should it come to fruition. There are crypto options and other navigable paths, but the racing industry, especially the struggling or closed venues could potentially exploit this egregious issue, and move to a prediction based pari mutuel environment creating a longer term tax benefit to the more than everyday player, and possibly bring in some new players to a game that desperately needs new fans and a new base.

Don\'t post/ don\'t play much anymore, but there is no evidence (SO FAR), the filing requirements that trigger a W-2g or 5754 for the syndicates will change. Hoping a reader out there with any pull can see this as a potential advantage to the racing industry. Good luck to all.

[johnnym]

It’s all shut down anyway.
Allegedly.

[Socalman3]

johnnym Wrote:
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> It’s all shut down anyway.
> Allegedly.

what is?

[Socalman3]

Gerard Wrote:
-------------------------------------------------------
> A W-2g or 5754 would not be triggered in this
> string\'s scenario as both the $600.00 winning
> wager and a 300x profit on the amount wagered
> needed to trigger the filing are not met. The
> player would then be left on his honor to report
> net (proceeds minus cost basis) winnings on
> Schedule 1 of their return. Professional players
> are either smart enough on their own or have
> someone in the employ to navigate Schedule C.
>
> So we are still left with the ten percent hangover
> on net winnings should it come to fruition. There
> are crypto options and other navigable paths, but
> the racing industry, especially the struggling or
> closed venues could potentially exploit this
> egregious issue, and move to a prediction based
> pari mutuel environment creating a longer term tax
> benefit to the more than everyday player, and
> possibly bring in some new players to a game that
> desperately needs new fans and a new base.
>
> Don\'t post/ don\'t play much anymore, but there is
> no evidence (SO FAR), the filing requirements that
> trigger a W-2g or 5754 for the syndicates will
> change. Hoping a reader out there with any pull
> can see this as a potential advantage to the
> racing industry. Good luck to all.


These are all regulations based on obsolete laws.  The new laws make anybody who cashes a relevant taxpayer. Under prior law, there were virtually no relevant taxpayers.  Existing regulations are irrelevant under entirely different legal regime. Regulations for new law will be dramatically simplified for W-2G -- they write themselves easily.  In new regime, all you need is a very simple W-2G issued by any platform on an annual basis.

In terms of coming to fruition -- the law is the law, it is on the books and exists......what does should it come to fruition mean?

[johnnym]

The Government

[Socalman3]

johnnym Wrote:
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> The Government

Presumably that will be temporary, but who knows. Here are some choice quotes I learned in law school that seem strangely applicable to the current situation:

1) There are no certainties in life except death and taxes.
2) The mills of the gods grind slow, but they grind fine.
3) The race doesn\'t always go to the swift or the battle to the strong, but that is the way to bet it.


Translation - A reprieve is by definition temporary.

[TGJB]

Re 3), Damon Runyon taught at your law school?

[Socalman3]

TGJB Wrote:
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> Re 3), Damon Runyon taught at your law school?

No, but Marvin Chirelstein did.  Chirelstein was a tax law professor and a horseplayer.  If he were alive today and was available to testify before Congress about this particular tax provision he would fricassee any proponent of this provision.  There are only two possible policy explanations for this tax provision and any tax professional would agree: (a) it is a political hit job by one faction against another faction or (b) sin tax theory.  There is no bona fide economic theory to justify this tax.

[Socalman3]

Socalman3 Wrote:
-------------------------------------------------------
> TGJB Wrote:
> --------------------------------------------------
> -----
> > Re 3), Damon Runyon taught at your law school?
>
> No, but Marvin Chirelstein did.  Chirelstein was a
> tax law professor and a horseplayer.  If he were
> alive today and was available to testify before
> Congress about this particular tax provision he
> would fricassee any proponent of this provision.
> There are only two possible policy explanations
> for this tax provision and any tax professional
> would agree: (a) it is a political hit job by one
> faction against another faction or (b) sin tax
> theory.  There is no bona fide economic theory to
> justify this tax.

Left out the important part, Chirelstein quoted Damon Runyon in our law school class.  I learned the quote in that context, but Chirelstein did not take credit for Runyon\'s quote - pretty sure he gave the cite.

[Boscar Obarra]

This heavily favors prediction markets

[johnnym]

As my professor said and I quote.
“ It’s one big club and you ain’t in it”.
Good luck

[Roman]

How idiotic! The country needs a complete tax reform in every aspect. Gas, sales, income, property, gambling, liquor tax all need to be reconsidered.