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23 April 2014
By John Robison, Slot Expert™
My initial reaction was to agree with your "tax guy". Even though you had to gamble to get the points to enter the drawings, your winnings in the drawings were not the direct result of a wager so you could not deduct gambling losses against the drawing winnings, like winnings in a slot tournament. I tried to find some clarification on the IRS web site, but its publications don't really address this situation.
Then I checked my goto guide for gambling and taxes, Tax Help for Gamblers by Jean Scott and Marissa Chien. You'll be happy to know that I'm completely wrong. They say if previous play is a criterion or requirement for participation in a drawing or tournament, then your winnings can be considered gambling winnings and you can offset them with gambling losses.
It will be well worth the investment for you to purchase a copy of Jean and Marissa's book and lend it to your "tax guy". You might also want to consider using a CPA, enrolled agent or professional tax preparer to prepare your return if by "tax guy" you mean someone who just happens to have a copy of TurboTax and is not a professional. Whoever does your return can always file an amended return.
According to the IRS, the best record of your gambling is a diary you keep yourself. The problems with win/loss statements are that they contain disclaimers that they are estimates, that no one attests to their accuracy, and that there's no guarantee that you were actually the one playing with the card. Jean's book has more information on keeping a diary.
How do you know that you wouldn't have hit that same jackpot if you had used your card? There's no control group observations with using your card that would indicate that the reason you hit that jackpot was because you didn't use your card and it wasn't just good luck. Congratulations on your jackpot, but it alone does not prove that the casino penalizes you for using your card.
There's a principle in marketing that it's easier to turn a good customer into a great customer than to turn a stranger into a customer. If the casinos could manipulate results on machines based on the use of a players card, doesn't it make more sense for them to reward carded players and not unknown players?
You might argue that the casinos have to pay for the comps and perqs given to carded players, but they give back only a small percentage of the theoretical win from a player. And comping players is considered a cost of doing business.
I've seen a number of times when banks of machines -- even whole sections of a casino -- have been hot and everyone was winning. That phenomenon is just a natural and expected outcome of random events. At times, the events will appear to be in sync. There's no manipulation by the casino.
If you really want to see if there's a difference when you use your card, you can try this experiment. Play 100 or so spins (the more, the better) both with your card and without. Keep track of the number of hits you get each way. The ratio of hits to spins should be very close under each method. Note that you can't use the amount won or lost because a large jackpot skews the results and you would need to play many hundreds of thousands of spins to use dollars instead of hits.
Please try the experiment and let me know the results. As it is, I think the only thing you're giving up is a lot of free play.
Send your slot and video poker questions to John Robison, Slot Expert™, at firstname.lastname@example.org. Because of the volume of mail I receive, I regret that I can't reply to every question.
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