March Madness is nearing its end, which means you'll soon have one less distraction keeping you from filing those last few tax returns before April 18. But the championship game isn't until tomorrow, April 4, so let's take a moment to review your bracket — and its tax implications.
Because you're such a loyal Spidell customer, we know you filled out your picks on the tournament bracket based on how close the competing colleges are to our Fed/Cal seminar locations. So your Final Four picks are undoubtedly Cal Berkeley, CSU Bakersfield, Fresno State, and USC.
None of those teams made it out of the first round, unfortunately, which means you'll have gambling losses to report. But while you weren't so lucky, you might have clients with gambling winnings if they picked any of this year's actual Final Four teams — Villanova, Oklahoma, Syracuse, and North Carolina.
Just how much money is changing hands during this year's NCAA men's basketball tournament? As reported in the Wall Street Journal, 70 million Americans will wager $9.2 billion on this year's NCAA men's tournament. That total includes everything from Nevada casinos to office pools and private bookies.1
If you win big (more than $600) on a March Madness bet placed at a casino, you'll receive Form W2-G, Certain Gambling Winnings, along with your payout. If you win your office pool, you're required to self-report, but only if the payout is more than $600 and at least 300 times what you wagered.2
What about those gambling losses? They go on line 28 of Schedule A, Itemized Deductions, as long as your losses don't exceed your winnings. And the IRS requires records (such as receipts or a diary) in order for you to deduct your losses.3
So as you fill out your bracket each March, remember to fill out your records as well: "Dear Diary, today I lost it all, by betting on …"
1 www.wsj.com/articles/the-other-march-madness-what-the-irs-thinks-of-your-bracket-1458207007
2 www.irs.gov/uac/Newsroom/Five-Important-Tips-on-Gambling-Income-and-Losses-1
3 www.irs.gov/taxtopics/tc419.html
For most of us, standard business casual wear is not a deductible work-related expense. Because even though we might sprint from our cars each evening to free ourselves from the shackles of tucked-in shirts and pointy heels, these items are still well within the realm of everyday wear.
The tax code allows deducting the cost of work clothes, but generally only if:1
However, in certain professions, outlandish outfits are part of the job description… and are deductible. ABBA and Lady Gaga both have experience on this front.
ABBA recently released a book in which they claim that the reason they wore "glittering hotpants, sequined jumpsuits, and platform heels" was to get around Swedish tax code, which only allowed the deduction for work clothing if the items were so outrageous that they weren't suitable for street use.2 U.S. tax code is similar, and hence, Lady Gaga's famous 2010 meat dress was deductible.3 (The meat dress is still in existence, surprisingly. Click here to see what became of it.)
In a 2011 case,4 a TV anchor tried to deduct work clothing that she claimed she kept completely separate from her personal clothing. She felt that the station's wardrobe guidelines were constricting her and forcing her to purchase items that she otherwise, if not for the job, would not have purchased. She lost, and it may have partially been because she was a little aggressive with what she included in her definition of work clothes: bedding, a robe, lingerie and thongs, active wear, and an Ohio State jersey. The court noted that even though she wouldn't wear her work clothes outside of work, it didn't mean the clothes were unsuitable for personal wear.
So until we're allowed to show up to the office draped in carpaccio, our work attire is probably suitable for everyday wear.
1 Rev. Rul. 70-474
2 www.forbes.com/sites/robertwood/2014/02/18/try-lady-gagas-clever-clothes-write-off-on-your-taxes/#4e2178eb966a
3 www.forbes.com/sites/zackomalleygreenburg/2011/04/20/lady-gaga-meaty-tax-deduction/#646d126739fc
4 Hamper v. Comm., TCM 2011-17
Here's a stumper for you … click below to reveal the answer.
You decide to move out of California — high taxes, too many cars, no water, and you're convinced bullet train crews tunneling through the rocky boundaries between the North American and Pacific tectonic plates will trigger the "Big One." Hello, Texas! You buy a 10-acre ranch outside of San Antonio for $500,000. It's flat, it's hot, and you're hours away from the ocean. You sell the ranch in an installment sale in July and return to the Golden State in November so you can live on a dinghy and watch the sun as it sets in the Pacific. Are the proceeds from the installment sale taxable by California since you sold the property before you moved back?
Answer:
When you file your part-year resident return, if you elect out of the installment method for California, the principal would not be taxable to California. (See Spidell's Analysis and Explanation of California Taxes® ¶22-605 Installment sales)
Austin Lewis loves classic rock, despite being born a few decades late, and he goes to more concerts than anyone else in the office. He's also a big baseball fan, and his worlds collided in 2014 when he saw Paul McCartney at Dodger Stadium.
Kathryn Zdan, EA, is not only director of the editorial department, she also "rocks the house" as a regular in curling bonspiels around the country.
Diane Fuller is a gourmet cook with a refined taste in all things sweet. From traditional Japanese desserts to the best bacon donut that's ever appeared in our break room, Diane knows how to satisfy her sweet tooth. She also writes children's poetry!
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