Gold Coast argues that its deductions were proper because, using the all-events test, the last event that determined its liability occurred when the minimum number of slot club points needed to earn a prize is accumulated by a member, because under law the customer's right to the points became fixed. On both returns, Gold Coast also recaptured as income the value of accumulated slot club points that had not been redeemed in over a year and which it had deducted as an expense in the prior year. On its 19 tax returns, Gold Coast deducted as an expense the slot club points that had not yet been redeemed over the previous year's ending balance. Under Nevada law, a customer's right to points became fixed when he or she accumulated 1,200 points. At the time, each slot club point was worth $0.0021, such that 1,000 points entitled a customer to prizes worth $2.10. The cards track their slot club points, and a member may redeem the points for various prizes.

Slot club members receive cards which they insert into the casino's slot machines.

Gold Coast Hotel & Casino (Gold Coast) is an accrual method taxpayer and operates a slot club, which is a promotional tool. Gold Coast Hotel is an example of a court applying the 'all events' and 'reasonable accuracy' prongs to determine whether a contingent liability is a deductible business expense.įor a general comparison of accrual method to the cash method, the other major process used to determine when a taxpayer has income, see Cash Method v. economic performance has occurred with respect to the liability.

the amount of the liability can be determined with reasonable accuracy, and.

all the events have occurred that establish the liability,.

Īccrual method taxpayers may claim deductions in the taxable year in which 1998), was a court case that addressed whether a casino, using the accrual method of accounting, could deduct the value of slot club points earned by slot club members in the tax year in which the members accumulated the minimum points required to redeem a prize, or whether the casino had to wait to deduct the value of the slot club points until the members actually redeemed them.Īccrual method taxpayers report income when earned and claim deductions when expenses are owed. United States of America and Commissioner of Internal Revenue Serviceġ58 F.3d 484 81 A.F.T.R.2d 98-970 98-2 USTC ¶ 50,800 98 Cal.

United States Court of Appeals for the Ninth Circuit

Gold coast hotel and casino