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Taxes on gambling winnings in sports

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Lucrative March Madness
Lucrative March Madness © Pierre E. Debbas/Shutterstock.com

Next up in the U.S. sports gambling spotlight is March Madness, when men's college basketball teams compete for the national championship.

Although the Super Bowl is the single biggest one-day sports betting event, the expanded basketball playoffs make this tournament the biggest draw for gamblers in sheer dollars wagered.

The college hoopsters battle on the court for a month, going from 68 teams to the Sweet 16 and Elite Eight elimination rounds. By the time the teams reach the Final Four and then the ultimate championship game, thousands of bets have been placed.

Nevada's sports book operators estimate they take in $80 million to $90 million in wagers on the annual tournament. That, however, is less than 4 percent of the illegal take, according to the American Gaming Association.

The FBI estimates that more than $2.5 billion is illegally wagered on March Madness each year. That's $2.5 billion from which the IRS will never see a penny.

But this year, the stakes were higher than ever. Legendary investor Warren Buffett backed a bet that would have paid out a $1 billion prize over 40 years to anyone who accurately predicted the victor of every tournament game.

No one won the nearly impossible bet. But in the event someone ever does, the IRS will definitely get its share.

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