in-20250917-IR-045250454NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDING: 01-20251937 Individual Income Tax For The Year 2024 HOLDING Nonresident Individual provided sufficient documentation permitting her to “net” her gambling losses and gambling winnings on a “per session” basis. ISSUE

I. Individual Income Tax – Gambling Income.

Authority: I.R.C. § 165; IC 6-3-1-3.5(a); IC 6-3-2-1; IC 6-3-2-2; IC 6-8.1-5-1; Shollenberger v. C.I.R., 98 T.C.M. (CCH) 667 (T.C. 2009); Schooler v. Comm’r of Internal Revenue, 68 T.C. 867 (1977); Indiana Dep’t of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463 (Ind. 2012); Lafayette Square Amoco, Inc. v. Indiana Dep’t of State Revenue, 867 N.E.2d 289 (Ind. Tax Ct. 2007); Shollenberger v. Comm’r of Internal Rev., 98 T.C.M. (CCH) 667 (2009); Schooler v. Comm’r of Internal Revenue, 68 T.C. 867 (1977); Treas. Reg.§ 1.6001-1(a); Rev. Rul. 54-339, 1954-2 C.B. 89 (1954); 45 IAC 3.1-1-2; I.R.S. Adv. Mem. 2008-011 (December 12, 2008); IRS Publication 529 (December 2020). Taxpayer protests an assessment and partial refund denial. STATEMENT OF FACTS Taxpayer is an individual who resides outside of Indiana. Taxpayer recorded her wagering gains and/or losses on a “per session” method from an Indiana casino. Taxpayer filed a 2024 Indiana Part-Year or Full-Year Nonresident Individual Income Tax Return (“IT-40PNR”) claiming that she was entitled to a refund of the income tax withheld by the Indiana casino on her wagering gains. The Indiana Department of Revenue (“Department”) reviewed the return and denied the refund in part. The Department adjusted Taxpayer’s Indiana’s income, resulting in an assessment of additional income tax, penalty, and interest. Taxpayer disagreed with the resulting assessment and refund amount and submitted a protest to that effect. Taxpayer waived the right to an administrative hearing. This Letter of Finding results. Additional facts will be provided as necessary.

I. Individual Income Tax – Gambling Income.

DISCUSSION The issue is whether the Taxpayer has established that she is permitted to “net” her “per session” gambling winnings and losses on her Indiana tax return. The Department determined that Taxpayer did not provide enough information to verify the amount of income she earned while gambling. As with any proposed assessment of Indiana tax, it is the taxpayer’s responsibility to establish that the tax assessment was incorrect. As stated in IC 6-8.1-5-1(c), “The notice of proposed assessment is prima facie evidence that the department’s claim for the unpaid tax is valid . . . The burden of proving that the proposed assessment is wrong rests with the person against whom the proposed assessment is made.” Indiana Dep’t of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463, 466 (Ind. 2012); Lafayette Square Amoco, Inc. v. Indiana Dep’t of State Revenue, 867 N.E.2d 289, 292 (Ind. Tax Ct. 2007). For nonresidents, IC 6-3-2-1(a) and IC 6-3-2-2(a) provide that income derived from Indiana sources is subject to Indiana tax. A taxpayer with income from gambling activities in Indiana must report that income in Indiana and remit income tax to Indiana regardless of that taxpayer’s residency. 45 IAC 3.1-1-2. In general, IC 6-3-1-3.5(a) provides that federal adjusted gross income is the starting point for determining Indiana adjusted gross income for individuals. Federal law states in pertinent part that “[l]osses from wagering transactions shall be allowed to the extent of the gains from such transactions.” I.R.C. § 165(d). Taxpayers must include all gambling earnings in their gross income, and they may not take deductions for their losses if they claim the standard deduction unless they are professional gamblers. Rev. Rul. 54-339, 1954-2 C.B. 89. A casual gambler is allowed to deduct his or her gambling losses only when he or she claims an itemized deduction on his or her Schedule A to the federal individual income tax return, Form 1040. Shollenberger v. C.I.R., T.C.M. 2009-306, 2009 WL 5103973 *2 (2009). The Department notes the Taxpayer does not claim that she is a “professional gambler” entitled to offset her Indiana gambling winnings against her gambling losses as ordinary and necessary business expenses. The Department points to I.R.S. Adv. Mem. 2008-011 (December 12, 2008). In the memorandum, an example was proposed with a taxpayer who played slot machines; the taxpayer was not a professional gambler. In the fact scenario presented, the taxpayer had some winning days (e.g., she entered with $100 and left with $500) and some losing days (e.g., she entered with $100 and left with nothing). The issue was whether the taxpayer had to count each winning machine pull (less wager on the pull) as income or whether the taxpayer could net winnings and losses each day in determining the taxpayer’s income. The 2008 memorandum concluded that netting upon redemption of tokens or money was appropriate in the scenario presented. The IRS AM 2008-011 explains: (Emphasis added) (Internal citations omitted). Treas. Reg. § 1.6001-1(a) requires Taxpayer to keep contemporaneous records to establish the amount of gross income, deductions, credits, or other matters required to be shown by such a person in any return. Schooler v. Comm’r of Internal Revenue, 68 T.C. 867, 870-71 (1977) provides further guidance: (Emphasis added). As casual gamblers, the IRS requires that each taxpayer provide or make available detailed documentation. The IRS suggests (1) a diary of winnings and losses that contains the date and type of wager, the amount won or lost, and the name and address of the gambling establishment; (2) proof of winnings and losses, which may include a W-2G, wagering tickets, statement of actual winnings; or (3) specific wagering transactions the taxpayer which may include keno tickets, record of the slot machine number and all winnings by date and time, the table number, or casino credit card data. See IRS Publication 529 (December 2020). These recordkeeping suggestions are non-exhaustive and tax liability depends on the particular facts and circumstances. Id. Taxpayer states that she uses “the cash receipts and disbursements method of accounting and files her returns on a calendar year basis.” Taxpayer maintains that she properly used the “per session” method pursuant to IRS AM 2008-011 in filing her IT-40PNR and is entitled to a refund of tax withheld on her wagering gains pursuant to the “per session” method outlined in IRS AM 2008-011. Taxpayer argues the Department erred in denying her refund and assessing additional income tax by only considering the income stated in the W2-Gs issued by the casino. To support her protest, Taxpayer has produced her own 2024 “daily sessions report.” The log consists of several columns including, (1) “[i]ntial cash buy in”, (2) the amount reported on the W-2G, (3) federal income tax withheld, (4) sales income tax withheld, and (5) net session adjustment calculation. Taxpayer also produced a copy of the Indiana casino’s “W2G Winnings Report” detailing the amount won each day during 2024 and the amount of state tax withheld on those winnings. Additionally, Taxpayer provided her previous Letter of Finding following a virtually identical legal protest on the same issue of “netting” her session winnings and losses on a “per session basis” for the tax years 2021, 2022 and 2023. Upon review, the Department agrees that Taxpayer was permitted to report the wagering gains and losses on a “per-session” basis pursuant to IC 6-3-1-3.5(a), I.R.C. § 165(d), and IRS AM 2008-2011. Taxpayer’s protest is sustained pending a supplemental audit to verify the amount of refund via review of Taxpayer’s log, W2-Gs, and other supporting documentation. FINDING Taxpayer’s protest is sustained. July 21, 2025 Replaces Finding Document: New