Mark Wahlberg Loses $250,000 Bet to P.Diddy Over the Fight of the Century

On Saturday, May 2, famed athletes Floyd Mayweather and Manny Pacquiao clashed in one of the biggest boxing matches in recent years. Titled the Fight of the Century, the bout drew millions of viewers around the world, including more than a few celebrity guests. Two such stars, Mark Wahlberg and P. Diddy, reportedly made a sizable wager over the results, with Wahlberg siding with Pacquiao and Diddy backing Mayweather.

The two originally agreed on a bet of $100,000, but eventually raised the number to $250,000. Wahlberg also promised to donate his winnings to charity if Pacquiao was successful. Unfortunately, it was Diddy who came out on top, with Mayweather winning the match by unanimous decision.

However, some tax experts are saying that while Wahlberg may have lost, Diddy is the one who will likely pay when tax season returns.

Research shows that Americans spend 7.6 billion hours preparing taxes annually, and for good reason, as the process is infamously confusing. However, there are a few rules that most people keep in mind: for example, you can deduct donations to charity, while you are required to report your gambling winnings. To the average person, this would therefore imply that you could deduct your gambling winnings if you donated them to charity, as Wahlberg planned to. But according to Robert Wood, a tax and litigation expert with Forbes, it isn’t quite so simple.

Wood says that the problem comes down to the strict rules gamblers face when it comes to tax deductions. While professional gamblers can deduct their losses as a business expense, casual gamblers cannot deduct gambling losses that are more than their winnings, and deductions are limited. Additionally, all gambling income is taxed, whether it comes from the lottery, a raffle, races or a casino. Non-cash prizes, such as cars and houses, are also taxed based on their market value. For this reason, the payer may provide the winning gambler with a special form, called a W-2G, for reporting gambling winnings, and may even withhold federal income taxes from the payment.

Meanwhile, Wood says that all deductions are limited. While you can deduct your gambling losses for the year on your Form 1040, taxpayers must be able to provide receipts, tickets, statements or other records to show the total amount they won or lost. The casino or other business will also report big wins to the IRS. For this reason, Wood says that all casual gamblers who want to use their gambling losses to offset their winnings should keep records. Otherwise, the winnings will be taxed while the losses will become nondeductible.

Even if Pacquiao had won, Wahlberg would have been unable to deduct the $250,000 as a charitable donation: the IRS always counts money derived from gambling as gambling winnings, even if you spend the money on charity. However, Wood says that Wahlberg may come out on top because of this. While Diddy will have to report the bet, all Wahlbeg has to do is win at least $250,000 on another wager. This way, Wood says he will violate the IRS rule that a taxpayer can’t deduct more than they win. But Wood notes that limits on itemized deductions could be costly, especially given Wahlberg’s wealth.

Fortunately for Wahlberg, there are reportedly some slick ways he could attempt to minimize his losses. For example, if he made the bet through his production company, Closest to the Hole Productions, he might be able to deduct the loss as a business expense. Likewise, Wood says his business relationship with Diddy might come in handy, as perhaps Wahlberg could claim the entire ordeal as a promotional expense.

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