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Revenue Ruling 83-106

1983–2 C.B. 77 (1983)

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Revenue Ruling 83-106

Internal Revenue Service
1983–2 C.B. 77 (1983)

Facts

A taxpayer owned and operated a licensed gambling casino. The taxpayer used the accrual method of accounting for both financial and tax-reporting purposes. As part of its operations, the casino extended credit to customers who met certain creditworthiness standards. In exchange, the customer provided the casino with a promissory note, commonly referred to as a marker, as evidence of his or her indebtedness. The marker specified the amount of credit extended. Customers generally used the credit to gamble at the casino’s tables and could apply any remaining chips or cash to their outstanding balance once they finished gambling. If a customer could not immediately repay the debt, the casino either held the marker until a promised repayment date or initiated collection efforts. Although gambling debts were generally unenforceable under state law, more than 95 percent of the casino’s customers repaid their debts. For federal tax purposes, the taxpayer reported revenue from credit transactions in the tax year the debts were actually collected. The Internal Revenue Service issued a revenue ruling to clarify when the taxpayer was required to recognize income from customers who gambled on credit.

Rule of Law

Issue

Holding and Reasoning ()

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