It’s often said that nothing in life is certain except for death and taxes, but for one Osaka resident, that maxim was little more than an old wives’ tale.

One day, the taxman came calling to the tune of 816 million yen (US$7.7M) over years of unreported winning horse race bets. However, in a game where the house always wins, this guy managed to flip the script and knock down the money owed to a relatively modest 67 million yen ($635,000).

The amount of 816 million yen in taxes alone might suggest that this man had made an absolute killing on the ponies. That was the first mistake the tax office made. Of course, in gambling you tend to lose quite a bit as well but in this case the taxes were only applied to his winnings.

That’s standard procedure though. If you had a winning lottery ticket and tried to deduct all of your previous losing tickets from its taxes, you would probably just get a blank stare or chuckle. Even if you were anal enough to have saved each and every ticket as proof, each one before was an individual game of chance and completely unrelated to that one winning ticket (see gambler’s fallacy).

However, this man’s situation was judged to be different. As testified in both Osaka District Court and appellate court, from 2005 to 2009 he had used a scratch sheet (horse race odds) software which would help him make his picks and automatically place bulk bets for him.

Thanks to the record on the software it could be easily seen that he had bought about 3.51 billion yen ($33.2M) worth of tickets in the five year period. Of that he won 3.665 billion yen ($34.7M) for an actual profit of 155 million yen ($1.47M) or about a fifth of what the tax office was demanding of him.

Again, that usually shouldn’t matter but Osaka District Court presiding judge Kenji Tanaka ruled that because the man’s betting was so heavy and consistent it was considered one continuous action to make a profit. As such Judge Tanaka felt it should no longer be considered gambling and declared it as “other income” from which the losing bets could be deducted as expenses.

This is the first judgment of its kind in the country, and as you’d expect, the government intends to take this to the Supreme Court of Japan. You can bet they won’t rest until they get the money they feel they deserve… and if you do bet, bet hard and bet often. It apparently may save your butt somewhere down the road.

Source: Sankei West 1, 2 (Japanese)
Top Image: Wikipedia – Tayfun0