Slot Player Held to be Professional Gambler

written by I. Nelson Rose

#07-13 © Copyright 2008, all rights reserved worldwide. Gambling and the Law® is a registered trademark of Professor I Nelson Rose,

A full-time, professional poker player has tax breaks that we part-time amateurs don’t have. For example, they can take off all their travel expenses to Las Vegas, California or Europe to play poker as costs of doing business.

But what about other gamblers?

In 1986, the U.S. Supreme Court ruled that a full-time handicapper of greyhound dog races could be in the “trade or business” of gambling for tax purposes. The case, Commissioner of Internal Revenue v. Groetzinger, was the first time the nation’s highest court declared that being a gambler can be an actual occupation, not merely a sinful pastime.

The gambler in Groetzinger was a race handicapper. He might not have been a good one, since he ended the year with a loss. But everyone conceded that he had an objective, reasonable belief that through skill and hard work he could show a profit.

The Minnesota Supreme Court has now held that a slot machine player, Estelle Busch, could also be in the business of gambling, even though only she believed she could make money. The Court agreed with the state Commissioner of Revenue that Busch’s belief was irrational. But the Court ruled that spending 40-60 hours every week playing slots and keeping detailed records did qualify as a business.

The U.S. Supreme Court declared that if a person “devotes his full-time activity to gambling, and it is his intended livelihood source, it would seem that basic concepts of fairness . . . demand that his activity be regarded as a trade or business.” The Court looked at the enormous amount of time and effort Groetzinger put in, the skill that was required and applied, and his plan to make a living off of betting at the track. “This was not a hobby or a passing fancy or an occasional bet for amusement.”

The IRS has published a list of additional factors to be considered when determining whether an activity is a trade or business. These include carrying on the activity in a businesslike manner, the amount of money made, and “elements of personal pleasure or recreation.”

And intent: Even after losing hundreds of thousands of dollars, Busch “believed she had a knack for predicting payouts.”

This does not mean that every gambler can now deduct their losses and expenses as business expenses on Schedule C, “Profit or Loss From Business,” of their tax returns. In other cases: A taxpayer who spent 35 hours every week at a horse track after losing his job as a salesman and who was seeking a new sales job qualified as a professional gambler. But a flower shop owner, appropriately named Pansy Panages, who only spent 20-25 hours a week after she closed her shop playing slots at a local Reno-area Smith’s, could not deduct $6,000 in tips she paid the grocery store’s employees for information on which machines were “due” to hit. A housewife who wised up after 66 days of playing, and losing, slot machines on an Iowa riverboat was ruled not to be even a short-term professional gambler.

A poker pro makes gambling a full-time business, meaning 35 or more hours a week, conducted in the same manner in which any other business is conducted, keeping records, etc., with a sincere belief that he or she will make a profit.

I think the Minnesota case is another breakthrough for the growing legitimacy of legal gaming.

But it also shows that determination can pay off.

For Estelle Busch, 72 years old, represented herself in front of the Supreme Court of Minnesota. And she beat the Attorney General, Commissioner of Revenue and the State itself.

Now that’s a player who knows her business.

© Copyright 2008. Professor I Nelson Rose is recognized as one of the world’s leading experts on gambling law. His latest books, Gaming Law: Cases and Materials and Internet Gaming Law, are available through his website,

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