Game
Show Contestants are not Engaged in Gambling Activities
A successful contestant on "Wheel of Fortune" could
not deduct the cost of travel, meals and lodging for himself and
his family as gambling losses against his game show winnings,
according to the Tax Court in Whitten v. Cm, T.C. Memo
1995-508 (decided 10/25/95). The taxpayer contended these
expenditures were akin to gambling losses which should off-set
his gambling winnings. The IRS contended the expenses were either
nondeductible personal expenses or miscellaneous itemized
deductions that may only be deducted if they exceed 2% of the
taxpayer's adjusted gross income.
The Tax Court held that, at best, the expenses were
miscellaneous itemized expenses subject to the 2% floor rather
than gambling losses. The court rejected the taxpayer's
contention that the expenses were tantamount to a wager or bet,
noting the expenditures were incurred for specific goods and
services, such as transportation, meals and lodging. The court
also expressed doubt that Congress intended to permit casual
gamblers a gambling loss deduction for these types of
expenditures.
The
Highlights of the Republican Tax Package
The House and Senate Republican Conferees have agreed on the
following tax package which will become part of the Budget
Reconciliation Bill. This package awaits discussions with the
White House, but President Clinton has already indicated he will
veto it. The major provisions include the following:
- Capital Gains
- Commencing January 1, 1995, there will be a 50% net
capital gains deduction for individuals, making the
highest rate for capital gains 19.8% (for those in the
39.6% tax bracket). The corporate capital gains rate will
be reduced to 28%. A capital loss will be permitted on
the sale of a principal residence. Capital gains will be
indexed for inflation commencing on January 1, 2002.
- Estate and Gift Tax Changes
- The unified credit would be phased in to $750,000 over a
6-year period. The annual gift tax exclusion of $10,000
would be indexed for inflation.
- Family Tax Changes
- A non-refundable tax credit of $500 per child would be
given to families with adjusted gross incomes
("AGI's") of less than $110,000 and single
filers of heads of household with AGI's of less than
$75,000. The credit will be phased-out for incomes
exceeding these thresholds. The credit will be $125 for
1995. An adoption expense credit not exceeding $5,000
would be available. There would be changes in the IRA
deduction. The limit will be raised from $40,000 to
$85,000 for joint files. Nonworking spouses will be
entitled to a $2,500 IRS contribution. The IRA rules
regarding withdrawals would be liberalized.
- Small Business Tax Relief
- The amount allowed to be expensed (written off) in the
current year would be increased from $17,500 to $25,000,
phased in over several years. Deductions for medical
insurance premium payments will be increased from 30% to
50% over several years. The S corporation rules would be
relaxed to permit larger groups of shareholders as well
as permit accumulation trusts to be S corporation
shareholders.
- Health Care Changes
- Long-term health care insurance proceeds would receive
tax-free treatment, including premiums paid by employers
under some circumstances. Sec. 401(k) plans could be used
to pay for long-term health care insurance premiums
without tax penalties. An IRA-type medical account would
be permitted which would allow for tax deductible
contributions and tax-free withdrawals for medical
expenses. The maximum annual contribution would be $2,000
for individuals and $4,000 for families.
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**NOTE: The information contained at this site is for
educational purposes only and is not intended for any particular
person or circumstance. A competent tax professional should
always be consulted before utilizing any of the information
contained at this site.**