Jamie Gold Responds to $12 M WSOP Lawsuit

[NickMPK]

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I cannot imagine how this is anything other than a very simple tax situation.

Gold files his 1040 with a Schedule C claiming the entire 12M minus various customary deductions of his trade. He gives Leyser a 1099 for 6M (and, of course, the 6M itself) and deducts that from his gross Schedule C earnings and pays taxes on the (roughly) 6M net left over.

Leyser in turn files a Sch C claiming the 6M from the 1099 income he received from Gold.

The government gets 35% of 12M either way, gift taxes are avoided, etc. This is just how it's done... now, can anyone hazard a guess as to why it would be more complicated than that?

I just cannot imagine that the tax ramifications of their deal are what is holding up the settlement.

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It sounded to me like Gold wanted to have the money paid into a corporation (that would presumably be newly founded with Gold and Leyser as the owners) so that they would be paying the corporate tax rates rather than the personal income rates. Of course, if they wanted to actually use the money, they would also have to pay personal income tax on the dividends, but they could release those over time to reduce their liability. I have no idea if this would work, but it is a plausible explaination.

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It's not a plausible explanation at all, because you can't do that. An individual cannot avoid paying taxes on poker winnings by setting up a corporation after he wins the money and funneling the money through it.

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I'm not saying you can do that. I'm just saying that Gold might think he can do that. In fact, that's what he says he is going to do in the phone message:

"I have the best tax attorneys and the best minds in the business working for me from New York and L.A. And what we’re probably going to do is set up a Nevada Corporation and it’s going to… I have to pay out of the corporation. I can’t just pay out personally because I could get nailed."

Gold might well be making a mistake in his tax planning that will result in greater liability for both himself and Leyser. But that doesn't mean he is trying to cheat Leyser out of his promised money.

[Bluegrass Poker]

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I am an authority on contracts since I took 1 semester of business law in college. I thought any contract over a set amount ($500?) had to be in writing or it was not valid, no matter what the circumstances?


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Ok, I'll answer this question. What you have referred to is the statute of frauds which does state that all contracts have to be in writing if over a certain amount. However, there are always exceptions and one of those is if the contract could be executed within one year from the date of the contract. In this case that is true since all terms of the contract have been completed other than paying Leyser. (Assuming Leyser is telling the truth.)

Another question I've seen come up several times in this thread and others on this issue deals with how can Leyser make Harrah's not pay Gold the 12M. That is the purpose of seeking the injunction. Leyser is claiming an ownership interest in that money and is asking the court to PREVENT Harrah's from paying the money until such time as the lawsuit about the rightful owners of the money is determined by the Court. The court does have the power to do this and Harrah's could face liability for failing to follow the order. That is where the term "irreparable harm" comes into play. As someone else stated that is a legal term of art that has to be used in order to get an injunction. The irreparable harm in this case would be the possibility that Gold would spend, invest, gamble or otherwise lose the money and be unable to pay Leyser should he prevail in the lawsuit. That's why the injunction included the 'gambler' allegation.

I don't who is right or wrong in this but I suspect that this will all be worked all in fairly short order.

I can't blame Leyser for taking this action,if I had an interest in collecting $6M I'd be taking the action to protect my interests as well.

[Willy]

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The government gets 35% of 12M either way, gift taxes are avoided, etc. This is just how it's done... now, can anyone hazard a guess as to why it would be more complicated than that?

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You're right. It isn't more complicated than that. That's why this "I haven't paid him what I owe him for tax reasons" excuse doesn't fly.

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I practiced tax law for thirty years and often found people would uses "for tax reasons" to explain the stupidest behavior. They were seldom challenged because tax laws are, in many cases, quite complicated. Frequently these people truly (and erroneously)believed that there would be some tax benefit from the behavior.
Here, however, any income tax planning had to have been complete BEFORE he won.

[Sysvr4]

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It's not a plausible explanation at all, because you can't do that. An individual cannot avoid paying taxes on poker winnings by setting up a corporation after he wins the money and funneling the money through it.

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I see you've already fielded this one, but just to clarify...

No, he certainly cannot setup any type of corporation or LLC after the fact to claim his winnings. However, I'll go one step further... even if he *could* do so, there would be no tax benefit to it. There are three scenarious I can think of:

a) He sets up a C corporation. The earnings are taxed at the corporate rates, the bulk of which will be around 34%, but select portions will be as high as 39%. The problem is that even after this, there's no way to get this much money out of the corporation without paying further tax on it. You can get some out, but he'd likely never get it all. He probably pays between 15-35% *more* tax this way, depending on a million things.

b) He elects subchapter S corporate status with the IRS. All of the earnings would eventually be taxed at his individual marginal rate (again, 35%) after the S corp gives him a K-1 for the earnings and he files it on Sch E. Thus, no tax savings.

c) He forms an LLC. Whether he elects to file form 1065 or file it on his 1040, it makes no difference. The LLC will give him a K-1 for the earnings if filed via form 1065 and must go on his 1040 Sch E and taxed at his individual marginal rate. If he files it on his 1040 to begin with, well, you get the point by now... no tax savings.

Now, he could probaby give some money to an irrevocable charitable trust and receive some tax benefits, but that goes way beyond my level understanding of the tax code. Still, there are limits on how much he could deduct through such giving and, IIRC, it's around 50%. So basically he couldn't give the whole 12M over and expect a 12M charitable deduction, even assuming such a trust exists.

So, no, he cannot form a corporation, and unless I'm missing something (definitely possible) I don't see how forming any other legal entity would save him money in taxes if he could.

Oh, and I'm not a CPA or tax attorney, so it is extraordinarily inadvisable to take anything herein as tax advice.

[NickMPK]

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I am an authority on contracts since I took 1 semester of business law in college. I thought any contract over a set amount ($500?) had to be in writing or it was not valid, no matter what the circumstances?


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Ok, I'll answer this question. What you have referred to is the statute of frauds which does state that all contracts have to be in writing if over a certain amount. However, there are always exceptions and one of those is if the contract could be executed within one year from the date of the contract. In this case that is true since all terms of the contract have been completed other than paying Leyser. (Assuming Leyser is telling the truth.)



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This is not quite right: any contract that cannot be performed within year comes within the Statute of Frauds (i.e. invalid if not in writing). Additionally, contracts for the sale of goods over $500 also come within the Statute of Frauds. This agreement is not for the sale of goods, and does not come within any other Statue of Frauds provision, so the oral contract should be binding.

[Lawman007]

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Gold might well be making a mistake in his tax planning that will result in greater liability for both himself and Leyser. But that doesn't mean he is trying to cheat Leyser out of his promised money.

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Look, Gold may be a jerk, but he's no idiot, and I'm sure that the lawyers and accountants advising him know what they are doing. That's why, in my opinion, it's pretty clear that screwing Leyser is exactly what Gold is trying to do.

I think this whole mess is really going to give Gold a very bad reputation, especially among top professional poker players. These guys live and die by their word. They bet huge sums of money and borrow/loan huge sums of money based solely on their word, and I don't believe they will think very highly of somebody who behaves as Gold has been behaving in this situation.

I mean, come on, at this point would you make a prop bet with this guy or loan him money based on nothing but his promise that he'll pay you? LOL I sure as hell wouldn't.

[Bluegrass Poker]

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This is not quite right: any contract that cannot be performed within year comes within the Statute of Frauds (i.e. invalid if not in writing). Additionally, contracts for the sale of goods over $500 also come within the Statute of Frauds. This agreement is not for the sale of goods, and does not come within any other Statue of Frauds provision, so the oral contract should be binding.

[/ QUOTE ]You are correct under the UCC definition of the statute of frauds but in many jurisdictions it can be broader than that. I don't practice in contracts or transactional law so I'm not up to date on current law in that area.

Also, I never said the contract wouldn't be binding. Oral contracts can be just as binding as written contracts. The poster I responded to made a vague reference to the Statute of Frauds and I attempted to give a short layman's explanation without getting too involved in the legal mumbo jumbo. Next time I'll have to research it better or more likely just say screw it and leave it alone. [img]/images/graemlins/wink.gif[/img]

[NCAces]

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Gold might well be making a mistake in his tax planning that will result in greater liability for both himself and Leyser. But that doesn't mean he is trying to cheat Leyser out of his promised money.

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Look, Gold may be a jerk, but he's no idiot, and I'm sure that the lawyers and accountants advising him know what they are doing. That's why, in my opinion, it's pretty clear that screwing Leyser is exactly what Gold is trying to do.

I think this whole mess is really going to give Gold a very bad reputation, especially among top professional poker players. These guys live and die by their word. They bet huge sums of money and borrow/loan huge sums of money based solely on their word, and I don't believe they will think very highly of somebody who behaves as Gold has been behaving in this situation.

I mean, come on, at this point would you make a prop bet with this guy or loan him money based on nothing but his promise that he'll pay you? LOL I sure as hell wouldn't.

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I think just the opposite. I think that all parties are doing exactly what they need to do right now. The only people that are being idiots are people on this and other NVG type forums who are imputing all sorts of ill motives to Gold without knowing any of the facts.

1. If any of you won $12 million tomorrow, would you have any idea what to do with it? What can you do to minimize your tax consequences?

2. There are some difficult share issues here I am sure. You have Leyser who says he gets half. But, the phone call said of after tax dollars. So, who pays the tax? Chan allegedly get's 10%. Is that after tax, or before tax. Is Leyser's cut before or after Chan's cut? These things take time to figure out.

3. Leyser is doing exactly what he has to do ... geting court protection of the money, pending distribution. Now that he has that, he should back off the public statements, if there have been any, where he or any of his reps are saying that Gold isn't going to pay.

This is why lottery winners normally take a few weeks/months to come forward ... they are normally (1) talking to all the people who had a share of their ticket about what to do, and (2) talking to attorneys and accountants to figure out how best to take the money. The difference is that the lottery winner doesn't have the money and can't blow it while everyone is figuring out what to do. Here, Leyser had to do this to keep the money from disappearing.

NCAces

[ericicecream]

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I cannot imagine how this is anything other than a very simple tax situation.

Gold files his 1040 with a Schedule C claiming the entire 12M minus various customary deductions of his trade. He gives Leyser a 1099 for 6M (and, of course, the 6M itself) and deducts that from his gross Schedule C earnings and pays taxes on the (roughly) 6M net left over.

Leyser in turn files a Sch C claiming the 6M from the 1099 income he received from Gold.

The government gets 35% of 12M either way, gift taxes are avoided, etc. This is just how it's done... now, can anyone hazard a guess as to why it would be more complicated than that?

I just cannot imagine that the tax ramifications of their deal are what is holding up the settlement.

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Filing schedule C would be the dumbest thing they could
ever do. Would have to pay self-employment tax.

[idrinkcoors]

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I think that that the bottom line in this story is that Bodog got pwned bigtime.... Everytime JG talks, his marketability goes down.

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I think all of us can agree on this. Little ol'Bodog beats out Stars (who had something like 1/4 of all ME players), and beats out Party and Full Tilt, and now they are stuck with a guy who, (rightly or wrongly), kind of rubs people the wrong way.

Say what you want about Hachem, Fossilman, and Moneymaker. At least those three guys are very likeable.