alf13 0 Posted April 7, 2006 Share Posted April 7, 2006 I have asked this question to a couple of accountants..and they have both given different answers that lead me to believe that they are both full of crap.Here is the question:You win...lets say..the WPT Championship at Bellagio for 5 million dollars.When they are going to pay you...you say that you would like to be paid in chips....they give you 5 million in chips...you put it in your lockbox, and "CLAIM" that it will be your "bankroll" for playing poker...Do you still have a tax burden if in fact...the 5 million is now "working capital"? Link to post Share on other sites
rookie2619 0 Posted April 7, 2006 Share Posted April 7, 2006 I have asked this question to a couple of accountants..and they have both given different answers that lead me to believe that they are both full of crap.Here is the question:You win...lets say..the WPT Championship at Bellagio for 5 million dollars.When they are going to pay you...you say that you would like to be paid in chips....they give you 5 million in chips...you put it in your lockbox, and "CLAIM" that it will be your "bankroll" for playing poker...Do you still have a tax burden if in fact...the 5 million is now "working capital"?Are you Tuan Le?? Link to post Share on other sites
ajs510 122 Posted April 7, 2006 Share Posted April 7, 2006 Ask Hobbes. He's good at this stuff. I can't see how there would be a tax liability on several thousand pieces of clay composite which are utterly worthless outside the casino, but I don't understand a lot about the ways of the IRS. Link to post Share on other sites
Butcho22 0 Posted April 7, 2006 Share Posted April 7, 2006 That's a very interesting question but I don't know the answer. I assume you wouldn't actually leave it all there and use it as stated though. So really it's just one of many ways to get around paying taxes. Unless you leave it there and only take away any profits..... Link to post Share on other sites
Brisco 0 Posted April 7, 2006 Share Posted April 7, 2006 I am fairly certain this is taxable as regular income. Link to post Share on other sites
Hobbes 1 Posted April 7, 2006 Share Posted April 7, 2006 I have asked this question to a couple of accountants..and they have both given different answers that lead me to believe that they are both full of crap.Here is the question:You win...lets say..the WPT Championship at Bellagio for 5 million dollars.When they are going to pay you...you say that you would like to be paid in chips....they give you 5 million in chips...you put it in your lockbox, and "CLAIM" that it will be your "bankroll" for playing poker...Do you still have a tax burden if in fact...the 5 million is now "working capital"?I don't know about the tax rules for professional poker players because I don't have any professional poker player clients. However, if you are not a professional poker player and it's just a hobby, you will owe taxes on your winnings regardless of what you do with it.I find it hard to believe that there is an exception for professional poker players, but I don't know for certain. Link to post Share on other sites
hardkorbeatz 0 Posted April 7, 2006 Share Posted April 7, 2006 if i was u id move somewhere where there are low to no taxes. of all the normal places u might want to live russia has the lowest taxes at 10%. (im pretty sure u can just not pay those either lol). hong kong is at 15-20% i believe. If u dont want to leave the states u can move to nevada which has no state income tax(by comparison ca takes up to 12% on top of the federales) or any other state with no state income. Im looking into getting antiguan citizenship so i can pay 3% B) Link to post Share on other sites
sixhands 0 Posted April 7, 2006 Share Posted April 7, 2006 if i was u id move somewhere where there are low to no taxes. of all the normal places u might want to live russia has the lowest taxes at 10%. (im pretty sure u can just not pay those either lol). hong kong is at 15-20% i believe. If u dont want to leave the states u can move to nevada which has no state income tax(by comparison ca takes up to 12% on top of the federales) or any other state with no state income. Im looking into getting antiguan citizenship so i can pay 3% B)move to canada, we don't pay taxes on poker winnings (as long as you play poker as a hobby) Link to post Share on other sites
The Czar 0 Posted April 7, 2006 Share Posted April 7, 2006 move to canada, we don't pay taxes on poker winnings (as long as you play poker as a hobby)Yeah, the only problem with that is you have to live in Canada. Zing. Link to post Share on other sites
sixhands 0 Posted April 7, 2006 Share Posted April 7, 2006 Yeah, the only problem with that is you have to live in Canada. Zing.okay you got me, I opened the door for that one Link to post Share on other sites
Farnan 0 Posted April 7, 2006 Share Posted April 7, 2006 By winning the tourney, it is HIGHLY likely you've recognized ordinary income. Having it paid in chips has no relevance.I spoke to one of our tax gurus and he agrees. There are a couple of ways the IRS can get you--first is the doctrine of constructive receipt. That is, if you have the option to take cash and don't--you are considered to have constructively received the cash. The second way is that the chips are essentially cash equivilents. So, despite receiving the chips instead of cash, you still received the $ due to the fact that the chips are as good as cash. Link to post Share on other sites
budfox427 0 Posted April 7, 2006 Share Posted April 7, 2006 No way around it. You are going to be taxed. and probably at higher than an ordinary income level. Most states will treat it like you won the lottery (in Texas, that's a cool half or just shy of it).You may be able to skate by for a year, but the fact that you win millions on television means someone will come looking for you eventually. Link to post Share on other sites
tiger47 0 Posted April 7, 2006 Share Posted April 7, 2006 I am a CPA and have some experience in this area. It doesn't matter what form they give you the winnigs in (cash or chips or dog bones), it is still taxable and they are going to give you a W2-G (gambling winnins reported to the IRS) if it is over a certain amount.Assuming you are able to itemize your deductions, you can deduct your gambling losses against you winnings in the year they are incurred. You may want to have proof of you losses to the best of your ability.If you a a professional poker player you will be able to deduct other expenses, such as travel, hotel, and meals while working.If you won $5M, you will be in the top tax bracket unless you lose it all in the same year. You'll just have to suck it up and pay the taxes, but don't forget about state and local taxes.The only helpful advice I can give you (not as a CPA, but as a gambler) is to bet $5M on one side of a football/baskedtball/baseball game and bet $5M on the the other. This way you will lose only the vig, 10%, and have a $5M loss to show the IRS. Of course, as a CPA I would never recommend skirting the law and I would just pay my taxes. Link to post Share on other sites
Farnan 0 Posted April 7, 2006 Share Posted April 7, 2006 The only helpful advice I can give you (not as a CPA, but as a gambler) is to bet $5M on one side of a football/baskedtball/baseball game and bet $5M on the the other. This way you will lose only the vig, 10%, and have a $5M loss to show the IRS. Of course, as a CPA I would never recommend skirting the law and I would just pay my taxes. What about the second tax form they'll have you fill out for the bet that wins? Link to post Share on other sites
thehidden 0 Posted April 7, 2006 Share Posted April 7, 2006 Yeah, the only problem with that is you have to live in Canada. Zing.god forbid you live in canada and don't pay taxes on your winning (if there are any) and when you suck out on someone and they take you out back and beat you get healed FOR FREE Link to post Share on other sites
ajs510 122 Posted April 7, 2006 Share Posted April 7, 2006 What about the second tax form they'll have you fill out for the bet that wins?My first question exactly...now you have two $5 million wins and one $5 million loss, and you're down the vig on the ballgame. Link to post Share on other sites
MasterLJ 0 Posted April 7, 2006 Share Posted April 7, 2006 The only helpful advice I can give you (not as a CPA, but as a gambler) is to bet $5M on one side of a football/baskedtball/baseball game and bet $5M on the the other. This way you will lose only the vig, 10%, and have a $5M loss to show the IRS. Of course, as a CPA I would never recommend skirting the law and I would just pay my taxes. I don't think a $5M loss results in a write-off of over $1M does it?10% x $10M = $1M$5M loss = ?Plus, you have to pay taxes on your $10M win. I'm really not clear how you come out ahead, but I'm certainly no CPA. Link to post Share on other sites
....Ian.... 0 Posted April 7, 2006 Share Posted April 7, 2006 if you're claiming poker as your proffession and the winnings as working capital, then you may have to pay citing capital gains tax I am a CPA and have some experience in this area. It doesn't matter what form they give you the winnigs in (cash or chips or dog bones), it is still taxable and they are going to give you a W2-G (gambling winnins reported to the IRS) if it is over a certain amount.Assuming you are able to itemize your deductions, you can deduct your gambling losses against you winnings in the year they are incurred. You may want to have proof of you losses to the best of your ability.If you a a professional poker player you will be able to deduct other expenses, such as travel, hotel, and meals while working.If you won $5M, you will be in the top tax bracket unless you lose it all in the same year. You'll just have to suck it up and pay the taxes, but don't forget about state and local taxes.The only helpful advice I can give you (not as a CPA, but as a gambler) is to bet $5M on one side of a football/baskedtball/baseball game and bet $5M on the the other. This way you will lose only the vig, 10%, and have a $5M loss to show the IRS. Of course, as a CPA I would never recommend skirting the law and I would just pay my taxes. wouldnt work. an auditor will cite the gain from the net of the transactions Link to post Share on other sites
psujohn 0 Posted April 7, 2006 Share Posted April 7, 2006 Sounds like what you're trying to do is act as a corporation. Though for IRS rules it'd probably have to be a real corporation setup in advance. And the corp would have to have paid the entry fee and such. Corporations however are of limited utiliity in avoiding taxes because corporate income is essentially taxed twice. The corp is taxed when it earns money and you're taxed when the corporation pays you dividends. The only trick I can think of - and I'm not an accountant - would be to setup the corporation, have it pay the entry and such and then take the winnings. The corp would have to pay tax on the income. The only advantage is the the corp could pay for "expenses" such as your corporate car and corporate housing that you would use strictly for business purposes of course. Link to post Share on other sites
Farnan 0 Posted April 7, 2006 Share Posted April 7, 2006 if you're claiming poker as your proffession and the winnings as working capital, then you may have to pay citing capital gains taxHell, anyone would kill for capital gains treatment. 15% rate.But the winnings would have to be considered "investment property" and this won't. Not to mention you have to hold the investment property for a year for you to get capital gains treatment. Link to post Share on other sites
joker12676 0 Posted April 7, 2006 Share Posted April 7, 2006 [The only helpful advice I can give you (not as a CPA, but as a gambler) is to bet $5M on one side of a football/baskedtball/baseball game and bet $5M on the the other. This way you will lose only the vig, 10%, and have a $5M loss to show the IRS. Of course, as a CPA I would never recommend skirting the law and I would just pay my taxes. How exactly does this help? You are gonna win one of these bets and that means winning another $5M so now you have $10M in winnings and jsut over $5M with the vig in losses Link to post Share on other sites
joker12676 0 Posted April 7, 2006 Share Posted April 7, 2006 1 with the these large amounts that we are talking about your itemized deductions are going to be limited. So filing as a pr might be more beneficial.2 no matter how you file the you won the money unless you lost all the money you are going to have to pay the taxes (if you open a business the money you put in as working capital was already taxed at some point and doesn't become a deduction until you lose it same here)3 Gambling winnings are not capital gains whether or not you are a pro they are ordinary income. Capital gains are on the sale of capital assets (real estate, stocks bonds etc)Don't forget though if you file as a pro you have to pay self-employment tax which is both halves of social security and medicare the good news is in 2006 only income just over 90000 is social security taxable (you're probably gonna have to make a lot more than this to make filing as a pro beneficial). The bad news is you have to pay both the employee and employer portions of SS and medicare and you can't flop back and forth between filing as a pro and amateur based on which is better the irs wants you to pick one and stay with it. So if you win the wpt champ or wsop make sure you wanna file as a pro every year or take the hit. The tax laws in the US really favor the government on gambling but some of the states are even worse. Link to post Share on other sites
ZenBrothers 0 Posted April 7, 2006 Share Posted April 7, 2006 I am a CPA and have some experience in this area. It doesn't matter what form they give you the winnigs in (cash or chips or dog bones), it is still taxable and they are going to give you a W2-G (gambling winnins reported to the IRS) if it is over a certain amount.Assuming you are able to itemize your deductions, you can deduct your gambling losses against you winnings in the year they are incurred. You may want to have proof of you losses to the best of your ability.If you a a professional poker player you will be able to deduct other expenses, such as travel, hotel, and meals while working.If you won $5M, you will be in the top tax bracket unless you lose it all in the same year. You'll just have to suck it up and pay the taxes, but don't forget about state and local taxes.The only helpful advice I can give you (not as a CPA, but as a gambler) is to bet $5M on one side of a football/baskedtball/baseball game and bet $5M on the the other. This way you will lose only the vig, 10%, and have a $5M loss to show the IRS. Of course, as a CPA I would never recommend skirting the law and I would just pay my taxes. When they give you the chips as a payout (ie Palms Ultimate Challange), you wouldn't be given the W2-G until you went to cash out. If you stuck it in a lock box, or brought the chips home, then no tax form would be given.But as far as not claiming it.....would this not be considered a texable benefit, like if you get paid with a car, or a house....ZenBrothers.......and as it has been said, no Taxes in Canada for gambling (as a hobby)...and remember the Country south of Detroit is Canada Link to post Share on other sites
XX44466XX 0 Posted April 7, 2006 Share Posted April 7, 2006 pocketfives has a good tax q&a section... Link to post Share on other sites
Uppie_ 0 Posted April 7, 2006 Share Posted April 7, 2006 here's my thoughts you wone 5million pay taxes on it and be happy and enjoy your money. Link to post Share on other sites
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