Lotto Installments
Lotto Instalment Payments
A client won the lottery in 2020 and chose to take instalment payments for the rest of her life. Then in 2021 the taxpayer incurred gambling losses. Can gambling losses incurred in one year be used to offset instalment payments from gambling winnings in a prior year?
Research came up with the following Court Case:
Where a gambling gain is paid out to and properly recognized by the recipient in tax years after the year in which the gain was won, the gain retains its character as a gambling gain in the later years. So where taxpayers won a state lottery in Year 1, and their winnings were payable in annual instalments beginning in Year 1 and ending in Year 20, and taxpayers properly recognized the gain only as each instalment was received, the payments in Years 2 – 20 were gambling gains in those years, and taxpayers were entitled to deduct gambling losses in each year up to the amount of their income from their lottery winnings received in that year. Rusnak, Charles C., (1987) TC Memo 1987-249, PH TCM ¶87249, 53 CCH TCM 835; IRS Letter Ruling 9808002.
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