US: Foreign Gamblers Now To Receive Equal Tax Treatment


On Tuesday, July 9, the United States Court of Appeals for the District of Columbia Circuit handed down a ruling that interprets Section 871 of the Tax Code in a manner more favorable to foreign gamblers. Before the court’s decision, foreign gamblers were taxed on a “per-bet” approach – now, just like U.S. citizens, foreign gamblers will be permitted to report the “overall income – gains minus losses” on a “per-session” basis.  Accordingly, when a foreign visitor gambles the night away in a U.S. casino, now only the net result of the night’s activities will be subject to taxation.

In Park v. Commissioner of Internal Revenue Service, the panel of judges examined the application of the term “gains,” which appears in both Section 871 and Section 165(d).  Section 871 relates to taxes imposed upon non-resident aliens in connection with “interest . . . . dividends, rents, salaries, wages . . . . and other fixed or determinable annual or periodic gains, profits and income” realized from United States sources.  26 U.S.C. § 871(a)(1)(A).  Section 165(d) applies to gaming income realized by U.S. citizens: “Losses from wagering transactions shall be allowed only to the extent of the gains from such transactions.” 26 U.S.C. § 165(d).

The court in Park adopted the IRS’ earlier interpretation of “gains” in the context of 165(d); specifically, “gain or loss may be calculated over a series of separate plays or wagers.”  Memorandum AM2008-11, Office of Chief Counsel, Internal Revenue Service 4 (2008) (emphasis added).  Ultimately, the court concluded that the IRS’ Memorandum provided “the most sensible interpretation of casino gambling ‘gains.’”  The court also emphasized the practical impact of a shift to a “per-session” approach, noting the elimination of the administrative burden presented by having to account for wins from each individual bet or wager.

The text of the decision may be viewed at

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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