What is the best way to avoid taxes?

[Baulucky]

The point is that you are a demonstrated moron that does not understand basic compounding. I'm done with you.

[cardcounter0]

Will they be coming to take away my MBA?
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[Baulucky]

WOW. You are even more stupid. Paying money for an MBA.

In all seriousness: Have a happy life with your MBA and your taxes. I did not mean to offend. Take care.

[cardcounter0]

You are right. If I just pumped gas or flipped burgers for minimum wage -- Look at all the taxes I would be saving!

[img]/images/graemlins/grin.gif[/img]

[Chicanist]

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WOW. I guess you are REALLY that stupid.

100-34% tax= 66,
1.02**17=1.40 (without taxes),
66x1.4= 92.42 (You still owe me 7.58 in chips PAL).

May I suggest a search on Amazon for a basic math book?.

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What you're forgetting is you need to look at the box case as well:
100-34=66%
1**0 = 1
66*1 = 66

so actually after 17 years you've earned 26 more chips than if you had cashed them in originally.

[fnurt]

[ QUOTE ]
The revenue is recognized (and the owing of taxes) occurs when you cash in the chips.

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I would love to see some legal citation for this, assuming it's not just an off-the-cuff answer. It seems to me that when you win a wager, you owe tax on the winnings at that moment, whether you get paid off in cash, casino chips, or a note that says the casino owes you.

If you can defer income from one year to the next merely by timing your visit to the casino cage, that offers a lot of possibilities, and the tax laws are generally drafted to avoid those possibilities. So I'd love to see the support for this concept.

[cardcounter0]

It is off-the-cuff, but it is based on some solid evidence.
Big Lottery Ticket winners have often waited until January to cash in their winning tickets.

The government wants to to declare your total winning minus your total losses. Notice that they don't break it down by each individual bet (last night I lost 2 pots and won 3), they want it broken down by "session". Your winnings would really be inflated if you accounted for every pot you dragged.

A session begins when you buy in and it ends when you cash out. If you never cash out it gives some support to the true gambler's motto "Life is just one long session".

[Ulysses]

This is simply incorrect and has been covered many times on these forums. Whether you cash in your chips or not has nothing to do with when your session ends. As far as the IRS is concerned, a win is a win, regardless of whether you keep the proceeds as chips or cash. Of course, keeping large amounts of chips rather than cashing them in will help limit your paper trail if you're looking to avoid taxes and is something many, many players do. But your contention that the gambling gain is "realized" when you actually cash in the chips is simply incorrect. While many investment vehicles are treated that way, that is not the case for gambling proceeds.

[Ulysses]

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I guess if a B&M player never converts his profits from casino chips to cash, the "chips" can be compounded tax free till he decides to convert. Could this be correct?.

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Legally, whether you cash them in or not, you are liable for the taxes. Of course, the IRS has little way of actually knowing you have those chips until you cash them in. So, in practice, someone could gamble for a couple of years, then cash in the chips and report the income at the end of that period. If one is short bankrolled and having those chips rather than paying taxes allows one to play higher and make more, this could be advantageous. Otherwise, one would be better off paying the taxes on time and investing the remaining money as opposed to keeping the chips and paying the taxes at the end, as chips just sit there rather than compound.

[StellarWind]

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That's why I ask. Is that "little" difference enough to avoid being liable for US taxes or not?.

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No. In theory when you win a bet you have taxable income and it goes on your next return. That's the basic rule. Fortunately the government recognizes that tracking individual dice throws, etc. is impractical. They let you aggregate your winnings for a "session". This is not precisely defined, especially as it applies to the online case, but it certainly happens within a day.

The whole never-cash-in-the-chips idea is not a legal way to avoid recognizing gains and losses. If the IRS and/or a tax court actually realized what you were doing it would be disallowed.

Similarly, it does not matter when you withdraw your online winnings. That has nothing to do with taxes. Incidentally, people who allow their online account balances to grow far in excess of their playing requirements are IMO very foolish. These are poorly regulated offshore businesses in an unstable and immature industry. Any online poker account could suffer a 100% "tax" at any time due to theft, error, business failure, or regulatory action.

The tax answer might be different if there was a real problem cashing in your chips. If the casino cannot or will not payoff then you didn't really win anything.