Joe owes willy $5,000 from an old gambling debt. Discuss the tax treatment for the $5,000 to both Joe and Willy.© BrainMass Inc. brainmass.com June 4, 2020, 1:03 am ad1c9bdddf
Joe's tax events:
Joe lost money gambling in some previous reporting period, but Joe didn't pay the debt. Since Joe is a cash basis taxpayer, he could only have claimed amounts paid if there were a legal obligation to pay, and then only to the extent of gambling winnings. Any transactions would have been only reportable in the year in which the transaction occurred.
Assuming Joe had gambling winnings in the same year as the loss, AND that Joe signed a ...
The 318 word solution discusses the possible tax events for both Joe and Willy including explanations to support the proposed treatment.