I currently have logged over 8000 bets with an online casino in the past week and am looking for the best way to log my data going forward. I've looked all around for guidance on how to do taxes for online gambling capital gains, but haven't found anything. I know that I have to pay taxes on the actual winnings themselves, but what about on the capital gains?
Two different approaches I've been considering/wondering if they're accepted by the IRS:
1. If I make 20 quick bets, one per second, losing half and winning half am I required to calculate cap gains for each of them? or
2. Is it possible for me to log my winnings/losings in a particular session and find the capital gain/loss using an average daily price?
I'm really at a loss and all my Google-fu has yielded nothing that's extremely helpful.
i know from my online poker days that you can calculate you gambling income in terms of sessions. that was confirmed in
a 2008 IRS memo:
A key question in interpreting § 165(d) is the significance of the term “transactions.” The statute refers to gains and losses in terms of wagering transactions. Some would contend that transaction means every single play in a game of chance or every wager made. Under that reading, a taxpayer would have to calculate the gain or loss on every transaction separately and treat every play or wager as a taxable event. The gambler would also have to trace and recompute the basis through all transactions to calculate the result of each play or wager. Courts considering that reading have found it unduly burdensome and unreasonable. Moreover, the statute uses the plural term “transactions” implying that gain or loss may be calculated over a series of separate plays or wagers. The better view is that a casual gambler, such as the taxpayer who plays the slot machines, recognizes a wagering gain or loss at the time she redeems her tokens. We think that the fluctuating wins and losses left in play are not accessions to wealth until the taxpayer redeems her tokens and can definitively calculate the amount above or below basis (the wager) realized. For example, a casual gambler who enters a casino with $100 and redeems his or her tokens for $300 after playing the slot machines has a wagering gain of $200 ($300 -$100).
bolding mine for emphasis. given their rationale for allowing calculation of gambling income by session, i think capital gains could be calculated by session as well. if there are no rates provided from the treasury department (there aren't), then you need to use a verifiable source for the bitcoin price and to be consistent about it. personally, i would use something like the daily closing price at coinbase. that should make it simple.
don't quote me on that though. you should probably talk to an actual tax professional.
