Mexican National Files Third Complaint for Vegas Slot Winnings Tax Refund

by Bruce Givner on July 7, 2015

On June 19, Enrique Free Pacheco filed his third complaint for a refund of taxes withheld from the winnings he earned by playing the slots in Las Vegas. This complaint is Pacheco’s third, following lawsuits filed in the US Court of Federal Claims in 2012 and 2014 for refund claims totaling approximately $19 million for taxes withheld from slot winnings from 2007 through 2012. Pacheco’s most recent complaint to Federal Claims is for a refund of $720,466 of $828,012 withheld from his 2013 US gambling winnings.

In his complaint, Pacheco cites Internal Revenue Service (IRS) Notice 2015-21, arguing that the notice allows a “per-session” approach to calculating gains, as opposed to a “per-bet” approach. The “per-session” approach would make his taxable gains much less than the amount to which withholding was applied. In addition, Pacheco argued that the “safe harbor” method determining gains or losses for slot machine play was “not inconsistent with the position” he took in the two prior refund lawsuits.

Pacheco and the IRS recently entered into a settlement agreement for the previous two lawsuits covering tax years 2007 through 2011.

In June 2014, Federal Claims Judge Marian Blank Horn issued an opinion stating that Pacheco had failed to prove that “his slot machine gambling activities during the years of 2007 through 2010 constituted a trade or business” as required under tax code Section 871. Therefore, Pacheco could not deduct annual total bets as business expenses.

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