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Betting on the Kentucky Derby, Tax Law, and You

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Photo Credit: Mark Zerof-USA TODAY Sports

(*Citrin Cooperman is a proud partner of Front Office Sports)

In 2018, $149.9 million was bet on the Kentucky Derby. Churchill Downs officials expect that number to increase even more at the 145th running of the race on Saturday. While it’s easy to forget, betters who win big this weekend don’t just get that money with no strings attached.

In the U.S., gambling winnings are taxable as ordinary income irrespective of how much a person wins. Gambling winnings are legally defined as the full amount of the winnings minus the cost of placing the winning bet.

“Gambling winnings are required to be reported to you and to the IRS on Form W-2G when you win at least $1,200 from bingo or slot machines, $1,500 or more from keno, more than $5,000 from a poker tournament and $600 or more from other types of gambles when the payout is at least 300 times the amount of the wager,” says Allison Brack, a Tax Partner at assurance, tax, and advisory firm Citrin Cooperman. “In addition, these winnings may be subject to withholding. However, regardless of how much you have won and whether you receive Form W-2G or not, all gambling winnings are taxable as ordinary income.”

READ MORE: Walking Through The AAF’s Bankruptcy Declaration

On the other hand, gambling losses are deductible as an itemized deduction. Unless someone is a professional gambler, however, the amount of losses they can deduct is limited to the amount of their winnings. In other words, someone can never have a net gambling loss as far as taxes are concerned.

Circumstances are different for professional gamblers who can deduct all of their losses. Whether someone is a professional gambler or just gambles as a hobby depends on each person’s facts and circumstances. The general standard to be used to determine if the person is in the trade or business of gambling is that the activity is pursued full-time, with regularity, for the production of income for one’s livelihood and not as a sporadic activity, mere hobby or for amusement.

Gambling losses include losing wagers plus expenses incurred in connection with the conduct of the gambling activity. Such activity includes travel to and from a casino or track. When reporting gambling losses, a person must be able to prove their losses with receipts, tickets, statements or other documents that show how much they have spent. A gambler betting on the Kentucky Derby Day program this weekend, for example, should save those unredeemed losing tickets. Losing tickets alone, however, are not enough since there are certainly plenty of those on the floor that anyone can pick up and claim as their own.  

“Maintaining a diary of your gambling activity is the best way to ensure gambling losses are sustained under examination by the government,” says Brack. “The diary should contain the date and type of wager, the name and address of the location of the gambling establishment and the amount you lost. This, in most cases, can be presented alongside losing tickets as proof of gambling losses.”

READ MORE: Mike Trout Will Pay Nearly $57 Million in State Taxes Per His New Contract

When it comes to joint tax returns, couples have a unique benefit when it comes to gambling gains and losses. If a husband and wife file a joint tax return, their gambling gains and losses are pooled together so that one spouse’s winnings can offset the other spouse’s losses.

Whether you’re gambling as a professional or for fun watching the race this weekend, keep this info in mind when next tax season rolls around.

Citrin Cooperman guides the sports world’s best companies and individuals when it comes to traditional accounting and tax support, guidance on developing business and financial plans, and much more. Visit their website to learn more.

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Examining The Future of Sports Sponsorships

GumGum Sports’ latest report, “The Future of Sponsorships”, details several key trends that sponsorship professionals should be keenly aware of.

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(GumGum Sports is a proud partner of Front Office Sports)

Since the dawn of professional sports, sponsorships have been a critical part of the space. Sponsorships draw massive numbers of eyes to a sponsor’s logo or product and supply teams/organizations with a significant portion of their revenue. GumGum Sports estimates that the combination of TV and social media team sponsorships drives $3 billion alone in media value back to the league’s sponsors, nearly a 5x return on investment.

And that’s not even factoring in value from digital streaming or the viewers that are able to watch via an illegal streaming service. In GumGum Sports’ latest report, The Future of Sponsorships, details several key trends that sponsorship professionals should be keenly aware of:

  • Artificial intelligence will quickly become an even bigger part of measuring the success of sponsorships by providing deterministic insights like sales uplift among rights holder fans vs. the general population.
  • Somewhere between 40-60 percent of every leagues’ inventory is missing a significant portion of its overall value.
  • The key to more accurate media value measurement is the ability to track data against a goal or industry standard. This gives those staff members involved in carrying out the actual campaign something to strive for.

Download ‘The Future of Sponsorships‘ to learn the various ways in which technology will build greater trust and performance between sponsors and rights holder

As the world around the sports industry continues to change, so does the overall sponsorship space. Those organizations who chose not to change with it run the risk of not fulfilling their potential or achieving maximum revenue.  Therefore, it behooves most professional sports organizations to understand how much room for improvement they actually have when it comes to securing and executing their various sponsorships.

To download the full report from GumGum, click here.

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Strategies For Building A Winning Ticket Sales Strategy

It is vital for ticket sales executives within sports to understand what goes into filling a stadium and the analytics used in building that strategy.

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(*StellarAlgo is a proud partner of Front Office Sports)

A strong ticket sales strategy is an important key to success for any professional sports team, especially those looking to grow rapidly.

“When we look at building a strong ticket sales strategy, our first focus is understanding our audience: how our fans engage with the club, their preferences and purchasing behaviors and their experience with our guest services,” says Allison Yee-Garcia, VP of Marketing at Sacramento Republic FC. “We seek to understand these key metrics through genuine interactions and strong data collection and analysis, which then shape how we move forward with new initiatives.”

A strong understanding of the audience gives a team a head start on preparing for the future.

“As we look toward a potential MLS stadium, we are already planning to implement technologies that will enable a robust understanding of our fans, including a cashless environment, beacon technology and data-enabled fan activations,” Yee-Garcia says. “We also recently launched an official mobile app that’s helping us with fan profile development and surveying as well as setting the groundwork for a move to an all-digital ticketing environment in 2020.”

Building a strong sales strategy can be a difficult process. In the opinion of many professionals within the sports industry, however, it comes down to a few critical factors.

READ MORE: The Kansas City Royals Partner With StellarAlgo To Learn More About Their Fans

Get Personal

In an age where everyone carries a screen in their pocket at all times, consumers are being sold products at every possible second. Teams need to find ways to make fans care about their messaging in order to stand out. This is one philosophy that StellarAlgo imparts to the more than 30 professional sports teams they work with.

“Your fans are busier than they’ve ever been in history. They get more marketing messaging than they ever have,” says StellarAlgo Founder and CEO Vince Ircandia. “There’s more demand on their attention than there ever has been in the past. While you have these really, really passionate people that love your brand, teams need to innovate and think hard about how well they understand their fans, and message to them on a more personal basis.”

Personal messaging can help build the lifetime value of that customer. For that reason, teams that develop a strong community around their brand will see better results than using a more generic marketing strategy.

After recently beginning a partnership with the Kansas City Royals, StellarAlgo is working with the team to go through audience analytics including survey data, marketing automation, primary and secondary ticket purchase history, and other datasets to find commonalities amongst their most engaged fans. This helps the team realize the best ways to cut through the clutter and reach new fans.

Know The Important Analytics

It is expensive to find new fans. If teams can better understand the fans within their current databases, they can find ways to bring them back more and more frequently.

“Segmenting those fans starts with having a really good dataset,” Ircandia says. “So we are using pretty strong machine learning techniques in order to really let our algorithms determine how fans cluster and which of those attributes are really important in terms of the messaging around the fans.”

For example, StellarAlgo helps teams pay attention to the size of frequent transactions. This can often be some of the most predictive data. Understanding where a customer is in their customer life cycle can help teams tailor their messaging.

“If there’s someone that’s just made a whole bunch of purchases with you, you’re going to deal with that a little bit differently than you would deal with somebody that maybe hasn’t engaged with you in a while or if they’ve engaged with you in a really specific way as of recently,” says Ircandia.

Behavioral and demographic data also makes a difference. Certain groups of people may like to purchase tickets far in advance, some may prefer to purchase day of game. Others value cheap tickets over premium experiences or family events over other themes. Understanding how those fans cluster helps prepare ticket reps for the sales process.

Know Why Something Was Successful

Engagement, clicks and revenue all factor into whether or not a sales campaign was as effective as it could have been. But why did the customers respond the way they did to the different elements of the campaign? Understanding this is important to replicating success in the future.

READ MORE: StellarAlgo Turns to Machine Learning to Help Solve Ticketing Challenges

Be Able To Change Course Quickly, If Needed

Many organizations don’t have the time to evaluate the success of a campaign until after it is over. Machine-learning and automation can help solve some of these issues.

“Organizations are so lean and people get so busy that the postmortems that they do for sales campaigns are not generally automated. That’s one of the things that we try to do at StellarAlgo with our machine-learning technology,” Ircandia says.

“With this instant insight, teams can pivot in the middle of campaigns and learn. Being able to  iterate on what kind of touchpoints or what types of creative might be resonating with different segments at different points in time is really important. It can make a difference when it comes to turning fans into repeat visitors.”

For more on how StellarAlgo delivers actionable data insights for Major League teams, visit stellaralgo.com/major-league.

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Professional Basketball Combine Prepares Overlooked Prospects For The Pros

The PBC provides a number of prospects not invited to the NBA Draft Combine with the opportunity to show their skills and prepare for the future.

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(*BFWD is a proud partner of Front Office Sports)

Every year, a handful of college and international basketball prospects are invited to the NBA Draft Combine, where their skills, fitness and physical measurements are evaluated by scouts. Prior to 2017, non-invitees missed a huge opportunity to market themselves for future playing opportunities.

Fortunately for these prospects, the Professional Basketball Combine (PBC) provides another opportunity to showcase themselves.

READ MORE: Jennifer Azzi Is Growing the Game of Basketball All Over the World

Two-way contracts between the NBA and G League were introduced in 2017 along with three new G League teams, effectively creating 105 new opportunities for professional basketball players in the United States. Jake Kelfer saw this as an opportunity to give a handful of prospects the additional exposure that could propel them to the next level.

In the two years since Kelfer founded the combine, the PBC has produced nine two-way contract players, 23 NBA Summer League invitees, and the 2017-18 G League Rookie of the Year Antonio Blakeney.

“The event was designed for players to turn their dreams of playing professional basketball at the highest level into their reality,” Kelfer says. “I think the proudest moment is being able to see that the event has created an incredible value to the NBA community and to these players.”

Thanks to an active web presence and quality auxiliary events like a Celebrity Influencer Game as well as a skills camp for those pursuing a career on the business side of basketball, the PBC has been able to create a strong name for themselves on the branding side of things. That’s easier said than done for an event that only takes place two days per year.

“It’s definitely been a process that takes time to build, but for us, the key is really making sure that we highlight our players accomplishments along with the value that we provide to players, agents, and teams,” he says. “Particularly we want our players to know that we’re with them, and we believe in them past the two days when the event takes place.”

Kelfer and team continued to make the combine a year-round brand by debuting scouting profiles and stat trackers for players on their channels.

As the event has grown, the PBC now prepares prospects for life off the court as well as on. This year, Kelfer and company are debuting the first-ever PBC Prospect Development Program in conjunction with BrandForward, PTD Business Management, and Urner, Lemos and Paul of Wells Fargo Advisors.

“We really wanted to create a program to help these guys have the maximum success on and off the court,” he says. “Specifically, we’re going to be working with them on creating a digital footprint. How do you brand yourself as an athlete? How do you use your influence for positive change? How do you generate revenue through your social media channels? In today’s environment, players are able to capitalize on more than just traditional endorsement deals.”

The program will consist of several workshops for the combine participants regarding topics like financial literacy and personal branding. Both are important concepts for young professional athletes to grasp.

READ MORE:  ‘Be Better’: Inside Good Men in Sport’s Hard-Hitting Message for Men

“In today’s hyper-connected world, athletes have tremendous power in their platforms,” says Stephanie Martin, co-founder and managing director of BrandForward. “Brands are eager to leverage the direct-to-consumer relationships that athletes have with their fans, so we help athletes to take the reins of their brand and build strategies that support their larger goals. We’re excited to be part of the PBC Prospect Development Program because we believe personal brand-building can be truly additive to a professional athlete’s career both on and off the court.” 

While the PBC began as a way for athletes to showcase what they can do physically, the event has quickly evolved into something much bigger and into a very important part of the global community surrounding the sport.

The third Professional Basketball Combine will take place on May 21 and 22, 2019 at Mamba Sports Academy in Thousand Oaks, California. For more information on this year’s event, visit professionalbasketballcombine.com/about.

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