Losing bets from horse racing should be considered expenses, Supreme Court rules


The Supreme Court has ruled that money lost betting on horses can for tax purposes should be considered expenses deductible from winnings.

The court’s Third Petty Bench, with Kiyoko Okabe as the presiding justice, rejected the prosecution’s claims that a 41-year-old man from Osaka Prefecture evaded ¥570 million in taxes by failing to declare income from betting on horse races.

The ruling on Tuesday upholds decisions by lower courts that sentenced the man to two months in prison, suspended for two years, for evading ¥52 million in tax.

According to the top court’s ruling, the man bet several million to tens of million yen per day online on weekend horse races across Japan over many years using specialized software.

The total amount of bets made between 2007 and 2009 reached ¥2.87 billion, while his winnings stood at ¥3.01 billion.

The man managed “sizable winnings by betting in an inclusive manner over a long time without caring about the results of individual bets,” according to the Supreme Court’s ruling.

The winnings should be considered miscellaneous income, instead of temporary income as the prosecution claimed, according to the ruling. Tax authorities accept larger amounts of tax-deductible expenses for miscellaneous income than for temporary income.

The nearly indiscriminate bets should be considered integrated economic activity, the Supreme Court said, explaining the reason for its decision.