Facts
Gold Coast Hotel & Casino (Gold Coast) is an accrual method taxpayer and operates a slot club, which is a promotional tool. Slot club members receive cards which they insert into the casino's slot machines. The cards track their slot club points, and a member may redeem the points for various prizes. At the time, each slot club point was worth $0.0021, such that 1,000 points entitled a customer to prizes worth $2.10. Under Nevada law, a customer’s right to points became fixed when he or she accumulated 1,200 points.
On its 1989 and 1990 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. 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.
Read more about this topic: Gold Coast Hotel & Casino V. United States
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