What is a Session When Playing Poker?

Exactly what constitutes a win and what constitutes a loss is probably the least understood aspect of record keeping for gambling. You say, "What's so hard about that? Any fool knows if he won or lost!" What appears simple is not. The tendency is to lump all gambling wins and losses together for the year, or at least by the month, or by the trip to Vegas, or by the type of gambling. This technique tends to minimize the amount of winnings reported, if any, which is obviously to your benefit. However, this is not what the IRS requires. In fact, the intent is the exact opposite; it is to require you to report all of your wins as income. The IRS outlines the "treatment of wagering gains and losses" in its Revenue Procedure 77-29. Most of the information the IRS publishes on this subject is based directly on this procedure. To illustrate, the part of Publication 529 on record keeping that explains how to substantiate gambling wins and losses is taken literally word for word from Revenue Procedure 77-29. Beginning with the tax year 1994, the IRS added the following note to the instruction booklet for Form 1040, to Publication 17 (Your Federal Income Tax) and to Publication 529 (Miscellaneous Deductions):

"Note. You cannot offset your losses against your winnings. You must report the full amount of your winnings and claim your losses as an itemized deduction. Therefore, your records should show your winnings separately from your losses."

The purpose of this note is to clarify the procedure for the accounting of wins and losses. Whether it does is debatable! What it does do is underscore the need for a more definitive explanation of what the IRS considers a "win" in each type of gambling activity. In the absence of such specific regulations, we must rely on the existing published procedures and the rulings of the courts for guidance in this area. These sources seem to indicate that the different types of gambling activities inherently have different definitions for what constitutes a win. This contention is supported by the fact that Revenue Procedure 77-29 contains the following statement, " … guidelines for further supporting information by type of game … " and then lists specific record-keeping guidelines for each of the following types of games: keno, slot machines, table games, bingo, racing (horse, dog, and so on), and lotteries. These guidelines are in addition to the procedure's general guidelines, which are applicable to all types of wagering.

To facilitate the presentation of our interpretation of the intent of the IRS guidelines for treatment of gambling activities, we have utilized the concept of a gambling session. Let us assume that a session is defined as the amount of activity that must occur before a win or a loss has to be recorded. With this concept in mind, we will discuss what constitutes a session for poker ring games.

Our analysis begins with the dreaded diary. Revenue Procedure 77-29 states that an accurate diary or similar record must be maintained to substantiate wagering wins and losses. It also states that the diary should contain at least the following information, and then lists five items, two of which are very revealing as to the thinking of the IRS in this matter, those being Date and type of specific wager or wagering activity and Amount(s) won or lost. From these two items, it can be inferred that a session usually occurs over a time period of one day or less and is limited to a specific wager or wagering activity. This does not rule out the possibility that sessions can span several days, as long as one does not cash out or change the type of game, such as a move from poker to craps. If we accept this concept, each session should be recorded separately in your diary and should, along with all the other information, show either an amount in the win column or an amount in the loss column, but not both. In other words, your session can have only three results: a win, a loss, or "rained out" (broke even).

Now it is time to define a poker session. As we attempt to define a poker session, keep in mind that this definition can be applied to all table games (craps, blackjack, roulette, baccarat, and so on), for which the IRS recommends recording the table number at which you are playing in your diary. This seems to imply that a new session starts when you join a table and ends when you leave that table. As table-game players understand, a session is composed of a multitude of bets over a relative short period of time, some resulting in wins and others in losses. Thus, your net result is the amount you cashed out minus the amount of your buy-ins, assuming no purchases of goods or services were made from the money you recorded as a buy-in. It may be acceptable to include the activities at more than one table in a session for a particular game, such as poker. This would allow you to net all of your gambling at one establishment for one visit to play one type of game. You may have to convince the IRS that it would cause you an undue hardship to have to record the numerous table changes made during one visit, especially if they are made without cashing in your chips and while playing the same game. To summarize, the accounting for poker fortunately does not require recording every bet made, which, until computers invade this arena, is virtually impossible. We recommend recording as a win or a loss the net result of our play by table or tournament.

In conclusion, we can now comply with the IRS' requirements by reporting all winning sessions as wins and all losing sessions as losses. To be perfectly clear, when you change tables, you technically are initiating a new session. This applies to both recreational and professional players. Good luck, and start that diary now!

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