Foreign gamblers cannot be taxed on every winning bet they make in US casinos when they end up losing money overall, a new court ruling says.
Rejecting current Internal Revenue Service policy, the U.S. Court of Appeals for the District of Columbia ruled that the agency must treat foreign gamblers the same way it taxes American bettors, who are assessed only on the profit they make after a gambling session. If they lose they owe nothing.
The different policies were based on the fact that foreigners cannot deduct gambling losses from their income, as US residents can, and thus should not be allowed to do so during individual gambling sessions.
However, Judge Brett Kavanaugh, writing for a unanimous three-judge panel, called that a “non sequitur”.
“After a night of gambling, it’s no fun to walk out of the casino a loser,” he said. “But it’s even worse when the IRS, on your way out, tries to tax you on each individual bet that you happened to win over the course of your losing night.”
The case was brought by a South Korean businessman who over the course of two years won more than $500,000 playing slot machines at a tribal casino in California, but lost even more, ending up $50,000 in the red, according to court documents. The IRS claimed he owed more than $150,000. He sued, but a federal Tax Court upheld the IRS policy.
