"C J Campbell" wrote in message ...


Even cash can cause a problem. A janitor won hundreds of thousands of
dollars playing blackjack in Vegas on New Year's Eve, but by morning he had
lost it all. The IRS came after him for his 'gambling income.' The janitor
asserted that he could take his gambling losses against his income. The IRS
agreed, but you can only take your gambling losses against your winnings
that same year. Since his losses came after midnight, he could only take
them against his winnings, if any, of the following year. This case was so
disastrous that casinos are now required to withhold a percentage of your
winnings for tax purposes.

I have my doubts about that story. First, if it had been
all in one sitting (not cashed in or out), it wouldn't even be declared as income.
The money is considered "won" when it is constructively transferred to the
winner. Since you are expected to turn in your chips when you leave the
casino, their accumulation on the table is not considered constructively paid.


I doubt this one event caused the withholding requirements. A single million dollar
winner wouldn't be an issue. What is an issue are the aggregate millions of gamblers
who can't be trusted to pay their taxes on the winnings in a timely fashion. Particularly
onerous are the "backup withholding" requirements from gamblers who might not
have ever declared their winnings to the IRS.