[TorontoCFE]

Here is my off the cuff reply without piles of thought:
1. Criminal Offence: There is no activity that is legal if you do it and illegal for a corporation to do. This is not part of the corporation debate. Being a corpoartion is meaningless - it doesn't imply being "for profit" any more than you doing something without a corporate structure. How many people convicted of running gaming houses were set up asa corporate structure? I bet zero.
If the law attempts to come after you for running a gaming house, it will no matter how you are set up and you would face no different consequences whether you are a corporation or not.
As a side note, the reason countries try to limit access to sites and not shut them down is because it is hard to determine whose rules apply to internet transactions. There are cases where it was determined that the location of the server is where the transaction takes place (I’m thinking of GST rules here which may not apply generally). In this cases, where you happen to be is no issue and doesn’t create a gaming house for you.

2. Corporate Income: I’m not sure why people think poker income is specified business income. All income that comes from an adventure in trade is active business income unless it comes from a specified investment business or a personal services business.
A specified investment business is one that generates dividends, rent, income from property or royalties. Poker is none of this – it is an adventure in trade, with you putting up and risking your assets without certainty you will get them back so poker is not a specified investment business.
A personal services business may apply. This designation was created to stop employees from incorporating so that they get more deductions than they would as an employee.
In our case, we are entitles to the exact same deductions whether we incorporate or declare it as business income. We are also not in the situation where we are providing what would otherwise be employment services through the corporation – we are pursuing an adventure in trade in a corporate structure. There is no potential employee –type relationship to a customer so I feel strongly this doesn’t apply.
If neither specified investment business and personal service business apply, then the corporate income is active business income, subject to the small business deduction.

I beleive strongly that, rather than the corporate setup drawing negative attention, it may actually be useful for proving that you take it seriously as a business and are trying to do the right thing. You will be treated far better than the people who do not declare their poker income would be if audited I assure you and minor issues will more likely be overlooked because of it.

3. Dividends – the corporation pays the favourable tax rate on the income and you would get the dividend tax credit to reduce the double taxation. While you do pay tax, the other benefits can outweigh the small costs.

4.Personal liability – the benefit is not in protecting you from liability in gaming.
Any criminal or otherwise behaviour will likely come back on you as the sole owner/employee. The benefit can come from what you do with the earnings. You can use income to buy a car or property in the corporation’s name and then any liability from use of that property will be protected. The use of the corporation to hold assets is a more indirect but useful and possibly significant advantage, depending on the dollars involved and what you do with it.

5. Income in kids/spouse hands – It is true that the law was changed since I wrote this and the benefits of this greatly reduced, but there are still some. As I’ve mentioned above, it can be what you use your earnings for. You could use the corporation for estate planning, pre-dividing (I think I just made that word up) assets among kids , through the corporation or providing limited liability for things like cars, etc.
The attribution you mention is true and can hurt you but attribution only applies to the first generation of the income. The dividends that get attributed back to you can be used to invest and produce other, 2nd generation income. That would not attribute back to you, so if you plan on investing earnings then it can make sense to have future income taxed in kids’ hands.

6. I doubt any sites will ban you for playing and then paying tax through your own business. This Term is intended to stop groups of people from playing in association. You are still playing as an individual and have no affiliation with others so the only reason sites would invoke this is if they had other reason to ban you. All accounts would still be in your own name, and, from a cynical point of view, they have no way of knowing your tax organization since all they see if your name in all dealings with them.


This is just a quick outline of how I would approach these issues. I’m not trying to represent legal or tax advice applicable to any given situation.