Question

Allison won't $3,200 betting on a long-shot in the Kentucky Derby. Unfortunately, she lost her lucky streak and ended up losing $5,000 on her next (and last) trip to the racetrack. Allison heard that she will be able to deduct her gambling losses, so she is feeling a little better. How much of Allison's losses will she be able to deduct?

a. $0- Gambling is not a business venture, so she will not deduct any of her losses
b. $3,200- She can only deduct the losses to the extent of her winnings
c. $5,000- She can deduct the full amount if she has documentation that verifies the losses

Answer 1

Allison will be able to deduct b) $3,200 of her losses.

Step-by-step explanation:

Allison will be able to deduct $3,200 from her losses. According to the IRS, gambling losses can be deducted, but only to the extent of gambling winnings. In this case, Allison won $3,200 in the Kentucky Derby, so she can deduct that amount from her losses. This means she can deduct the full amount of her losses, which is $5,000, up to the amount of her winnings. However, it's important to note that Allison will need to have documentation that verifies her losses. This could include records of her bets, receipts, or other forms of documentation provided by the racetrack. Without proper documentation, she may not be able to claim the deduction.