Tax implications of being staked

[BigBry]

In the "Problems I Hope To Have" category...

I've had a few buddies buy pieces of me for event #6. It was done more to provide some cover to give them an excuse with their families to get to Vegas this weekend than anything else. However, what happens if I strike gold and we win some money?

Do I need to have a informal partnership agreement written up beforehand, so we don't potentially get hit with double taxes? I'd hate to win a good chunk of change and have it get doubled-taxed. Ideally, I'd like them to be responsbile for their own tax mess on their pieces.

So, do i need to set this up pre-event, or can I worry about this when I cross that bridge?

[AlaskaGal]

This is on PocketFives.com :

TOURNAMENTS

-What are the rules for sharing tournament action?

If you are swapping or selling action in a tournament and you win, you need to give the casino a Form 5754. You can find this Form along with the instructions on the IRS website at www.irs.gov. (http://www.irs.gov.) Believe it or not, this is a simple Form to understand and complete. All you do is complete Part 1 with the amount you won, your name, social security number and address. You then complete Part 2 showing each person that you are sharing your winnings with, along with their name, social security number, address, and the amount that you are paying them.

Seems like you are a bit of a snitch but really you are helping everyone. If you decide not to prepare this Form, (or didn’t know about it until now) the entire amount that you won will have to be claimed on your tax return. This can be a really big problem for several reasons. First of all, if your poker playing is something that you do for fun, i.e. a hobby, the entire amount you won will show up on your Form W-2G and will have to be claimed on the front of your tax return on Line 21 as “Other Income”. The only way to offset the money you won during the year is with the money you lost during the year and with the money that you “payback” to others that back you. The only place to do this is on a Schedule A which is for itemized deductions. The bad part is that if you cannot itemize, you technically cannot offset those gambling winnings at all. It’s not fair but it’s the rule. Whether or not you can itemize can be determined fairly easily by looking at the instructions for the Schedule A.

Here is the whole link:
http://www.pocketfives.com/DD6E4B33-181C-4E60-80FA-433BE6A8AF8C.aspx#5

[BigBry]

Thanks, that's exactly what I'm looking for.