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Disclaimer: I am a CPA and have had 3 clients audited for online gambling in the last 5 years, two for sports betting and one for poker and sports betting.

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Thanks for weighing in. I apppreciate your perspective. I am a CFP who is trying to figure out how to handle my gambling winnings. I have consulted with a few CPA's that I work with in this business but there seem to be very few who have at this point actually interacted with the IRS on this particular point (namely volume rakeback discounts for online poker).

The attorney I consulted with has looked at the comps case and found it should not apply to rakeback that is classified as a rebate. She did not determine that rakeback is clearly excludable from income, only that it reasonable/arguably excludable. There is case law on the treatment of rebates that is favorable to taxpayers under similar situations. I caveat that with the statement that most of these cases are corporate taxpayers.

The question is not whether the IRS will agree with you, but whether it is arguable excludable or indeterminate. If audited I am sure I would just fork over the taxes for the rakeback rather than fight it. The real question is whether excluding it prior to an audit is reasonable or whether such an exclusion would be subject to penalty. If it is reasonable I would rather just exclude it and be aggressive.