Ask the Slot Expert: Does the IRS accept win/loss statements?

Will the IRS accept win/loss statements?

According to Topic 419 - Gambling Income and Losses on the IRS web site, "it is important to keep an accurate diary or similar record of your gambling wins and losses."

Just doing a quick search for relevant sites, I found a number of cases in which the IRS and tax courts did not accept a win/loss statement as proof of a loss. Some of the reasons given:

• The statement itself contains a disclaimer that it is an estimate and not an accurate record.
• There's no proof that the person claiming the loss was the person whose play was recorded and was the only person whose play was recorded.
• The statement is not necessarily a complete accounting of the person's play.
• The statement is not signed.

My reference for tax matters is Jean Scott and Marissa Chien's Tax Help for Gamblers. Their section on win/loss statements agrees with what I found online. The IRS will generally not accept the statement as proof of loss, but it will accept is as corroboration of your personal log, like ATM receipts, redeemed markers, etc.

Jean and Marissa say that the IRS is evolving in terms of win/loss statements. "There is a general trend within the IRS to accept these statements," they say, but then follow that statement with a warning. Instead of using the sum of your W-2Gs as your win, they use the total coin-out number on the statement, which is the sum of every payout you received no matter how large or small. That number is going to be significantly higher than your W-2Gs.

I have to admit that even though I keep a record, I haven't deducted losses when I've had a W-2G so I have no firsthand experience with justifying a claimed loss. The additional taxes weren't that much compared with the potential hassle of an audit.

I live about an hour's drive from the Shreveport/Bossier City casinos. Being on boats, the Sams Town "PLAY" area is on three decks. I asked a couple of employees where the better slots were located and was told, in both cases, that "MOST" of the wins were on the middle deck but no particular machines(s).

I played penny slots and found a machine where I could play on $20 for more than an hour before cashing out at plus $17. While there I observed a young man and companion sit down at a quarter Double Diamonds machine, put in $20, and after two max bets hit the max jackpot. His machine was located midway along the wall, dockside, middle deck, right side as you come in.

Here is the question: Did he get lucky?

Yes, he got lucky. Even if the machine is one of the loosest machines on the boat, that just means that it pays back more to its players in the long run. It doesn't mean that you're going to hit the jackpot when you play it.

Speaking of loose machines and loose machine placement theories, the slot market has changed significantly in the last decade or so. In the past, slot directors may have felt the need to place machines that hit frequently where players could see other players winning on them and be encouraged to play. Most of today's machines, however, have their own builtin incentives to play. Players keep playing machines with bonus rounds to get back to the bonus round just one more time. Furthermore, players don't care what's happening to other players because their own machines are so entertaining -- much more entertaining than the typical reel-spinning slot of the last two decades of the 20th century.

Most slot directors today decide on a payback percentage for each denomination and order machines close to those percentages. They're more concerned with laying out comfortable and inviting slot floors than placing loose machines in visible locations.

Finally, here's one thing to keep in mind about the statement that most of the wins occurred on the middle deck. If the machines on the middle deck get more play than those on the top and bottom decks, it follows that most of the wins would occur there and that the machines aren't necessarily better.