Gamblers Buy Losing Lottery Tickets on eBay to Offset Taxes
Listings offer stacks of worthless scratch-offs for prices like $10 for a pound of Pennsylvania tickets or $575 for $90,000 in Florida losses, in a practice considered tax fraud by some experts
Some gamblers are buying losing lottery tickets on eBay as a way to offset taxes on their gambling wins. Listings on the site offer stacks of worthless scratch-offs and instant tickets for various prices, such as a pound's worth of losing lottery tickets from Pennsylvania for $10 or thousands of dollars' worth of losing tickets, like Ohio lottery tickets worth $5,200 in losses, for $29.99.
One listing on eBay boasts $90,000 worth of losing Florida tickets for $575. The practice is considered a form of tax fraud by some experts, as it exploits a provision in the tax code that allows people to deduct gambling losses from their winnings.
All earnings from lotteries, raffles, sports betting, horse races, and casinos are fully taxable and must be reported on a return. The IRS requires an accurate diary of winnings and losses, plus receipts, tickets, statements, or other records to back up a deduction for gambling losses. The deduction for gambling losses is capped at whatever winnings were reported.
Only filers who itemize and who kept a record of both winnings and losses can deduct gambling losses. Jeffrey Hoopes, a professor of accounting at the University of North Carolina's Kenan-Flagler Business School, considers buying losing lottery tickets on eBay for tax purposes to be a form of tax fraud.
## Why it matters The practice of buying losing lottery tickets on eBay to offset taxes has significant implications. It highlights the potential for tax fraud and the need for individuals to accurately report their winnings and losses. The IRS provision allowing people to deduct gambling losses is intended to provide a fair way for gamblers to offset their taxes, but it can be exploited by those seeking to commit tax fraud.
The fact that listings on eBay are offering stacks of worthless scratch-offs for prices that seem too good to be true raises questions about the legitimacy of these transactions. As Jeffrey Hoopes noted, this is an interesting example of tax fraud, and it is unusual that it is happening on a platform like eBay.
The stakes are high, as tax fraud can result in significant penalties and fines. Individuals who engage in this practice may be putting themselves at risk of being audited and facing consequences. It is essential for individuals to understand the tax code and to accurately report their winnings and losses to avoid any potential issues.
## What happens next As the practice of buying losing lottery tickets on eBay to offset taxes continues, it is likely that the IRS will take notice. The agency may increase its scrutiny of these transactions and take steps to prevent tax fraud. Individuals who engage in this practice may face audits and penalties, and eBay may take action to remove listings that are deemed to be facilitating tax fraud.
In the meantime, individuals who gamble should ensure that they are accurately reporting their winnings and losses and keeping detailed records to support their deductions. By doing so, they can avoid any potential issues with the IRS and ensure that they are in compliance with the tax code.
