Carpe Diem

Markets in everything: Used, losing lottery tickets

00505_d8Q6Rdlvcy3_600x450An ad on Craigslist is offering $34,000 worth of used, losing lottery tickets (see photo above) for $500, to help offset the tax liability for somebody who might be reporting gambling winnings to the IRS? Would that really work?

Losers OFFSET gambling winnings – the TAX MAN COMETH. Here you have seventeen $2K packs of losing scratch off tickets to help ease that burden. This will save you around $7,000 in taxes.

HT: Fred Dent

8 thoughts on “Markets in everything: Used, losing lottery tickets

  1. The quoted section is completely bogus information. Gambling losses do NOT offset gambling winnings. Winnings are fully taxable, period. Gambling losses are deductible only if one itemizes deductions on Schedule A, and then only to the extent of gambling winnings. Many people don’t even itemize their deductions, so this would not help them. Even if they did itemize, the losses are deductible only up to the amount of any gambling winnings, not against any other income. Anyone with any winnings will surely have losses in excess of those winnings (because “the house always wins”, but the losses are just that–dead losses.

    • Jane Johnson, you are correct about itemizing, but I don’t understand your idea of the term offsetting. For example, the $34,000 in gambling winnings goes on the 1040 as income and up to $34,000 in gambling losses goes on Schedule A as miscellaneous deductions not subject to the 2% limit.

      The question about buying those losing tickets on Craiglist would be how loose you want to play the IRS gambling documentation rules and how convincing you can be during the almost inevitable audit by a professional trained to detect fraud and deceit. I wouldn’t want to play head games with those guys and gals. Personally, I don’t gamble other the stock market, and I would not suggest or be part of such a sham. There are better legal ways to cut your tax burden.

      • Walt

        The offer of losing lottery tickets is bogus, as Jane points out.

        If you buy a lottery ticket and win nothing, you have lost only the price of the ticket. Failing to win some larger amount isn’t the same as losing that larger amount. There is no possible way those tickets shown could have cost the $500 asking price, and the $34k loss is meaningless.

        As for taxes, Jane points out that losses can only offset winnings. If you win enough to merit a 1099, you can reduce the taxable amount of your winnings by the amount of your losses that you can document. Then, of course, the IRS will ask you To explain the income you earned in the form of comped rooms, meals, shows, transportation, and any other “freebee” you were provided. There are no stupid people auditing tax returns. Scumbags aplenty, but no stupid people.

        If the free room you got at the ca-sino has a posted rate of $300/night – not unusual for a very ordinary room, and even though no one ever pays that much – you earned $300/day while you were there.

        (the blog spam filter chokes on the word ca-sino)

        • Ron, I called it a sham, pointed out the audit consequences, and told you how and where the figures would be entered on which IRS form. We are all on the same page here.

          If you are doing everything on the level, the gambling loses are not much different than using your first $3,000 in capital loses to cancel out any capital gains or $3000 in income (with excess carried over into future tax years). I would use the term offsetting in that case and so does the IRS.

  2. Ron, what the tickets cost the seller, how much he won or lost, and his tax implications with the IRS have nothing to do with the buyer. If the buyer buys them and tries to use them, the cost is $500, and that’s fraud if he or she is caught, but the bogus tickets would be deductible on paper (and there’s a high probabality of getting caught). How much the bogus tickets save the shyster would be determined by his tax rate for his income level.

    I’ve never personally seen a comped room on a W2G that is sent to declare gambling winnings over $600, but I agree auditors are usually highly trained and advanced in their carriers by finding money in the audit process.

  3. Auditor question:

    Mr/Mrs. Soandso, where did you report all of your winning lottery ticket revenue? Do you expect me to believe that you bought $34,000 worth of losing lottery tickets, and not one winning ticket?

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