Canadian Online Poker Tax Thread

[SlightlyMad]

Myst,

RC4409 (Keeping Records from the CRA's website) states:

"How long do you need to keep your records?

As a general rule, you must keep all of the records and supporting documents that are required to determine your tax obligations and entitlements for a period of six years from the end of the last tax year to which they relate."

This would imply that you are allowed to destroy your records after six years. However, in the case of someone having a televised tournament win, and then claiming (for example) only $20,000 that year as income, some serious questions may be asked, even AFTER the six-year period has passed. There is no obvious statute of limitations within the penalties section of the Income Tax Act on how far back they can go if they can prove the income without your documentation.

[Gamblor]

I took tax this year and have the following to add: First, TorontoCFE knows what he's talking about, listen to him, he is way more knowledgeable than me, but in case I add something helpful here it is.

Some cases:

MNR v. Morden [1961] CTC 474 (Ex Ct): The court held that even if a gambler does not treat it as a business, with the right level of organization and intent, a taxpayer could be in the business of gambling and therefore income is taxable.

Lala Indra Sen (1940) 8 ITR (Ind.) 187: “…try to see what is the man’s own dominant object – whether it was to conduct an enterprise of a commercial character or whether it was primarily to entertain himself…”

Leblanc v. The Queen [2006]: Two brothers spent an inordinate amount of time and money playing sports lottery games. The appellants lost most bets but won a huge amount on long-shots, and employed runners to pick up tickets from the stores. Court held that number of bets not determinative. “The appellants are not professional gamblers who assess their risks, minimize them and rely on inside information and knowledge and skill. They are not like the racehorse-owner, who has access to the trainers, the horses, the track conditions and other such insider information on which to base his wagers. Nor are they like seasoned card players or pool players who prey on unsuspecting, inexperienced opponents. Rather, they are more accurately described as compulsive gamblers, who are continually trying their luck at a game of chance.”
<ul type="square">[*]this obv implies that "seasoned card players'" income would be assessed differently[/list]
Also to be considered is that capital gains are taxed at only 50% of the normal rate. I wonder if you could convince a court that your bankroll is capital (which it essentially is), such that any increases are treated as capital gains. Of course its hard to argue your winnings are due to appreciation of capital.

Finally, section 245, the anti-avoidance Rule, essentially that you can't make any transaction i.e. do anything sketchy that technically is legal according to the letter of the law, but is really against the spirit of the law and the transaction is really just a tax-avoidance transaction. The Queen v. Canada Trustco Mortgage Co., 2005 SCC 54 is the authority on that.

[kaj_kyle]

hi, i have read most of this thread, however there seems to be no decisive answer. I am going to see a tax lawyer to talk to him about my situation, but just to get some opinions, i am an 18 year old student whos not a professional poker. I have been playing poker for a bit over a year and have made over 600k+ and if i keep on sucking out hopefully will continue on that trend. Do u think i should start paying taxes?

[Alexos]

Does anybody know if withdrawing by credit card can trigger signals to the CRA? Do they have any way to figure out you're paying your Visa bills with online poker money?


What about audits, if you dont have any big items in your name, live with your parents, etc etc...do they look at every visa bill and try to figure out where the money comes from?

What triggers such an audit anyways? I'm just looking at opinions from people that have had experience with this. thx

[T_Mac]

This is an excellent thread and ty TorontoCFE and everyone else who contributed.

Nice to know being a student isn't any defence, that sucks.

I'm pretty ignorant about taxes and all these types of things. Who do I need to talk to (lawyer? accountant? financial advisor?)

What is the "worst case" scenario for someone who decides not to pay taxes?

[TorontoCFE]

It's 7 years and if they find that there was criminal
intent or serious behaviour, then there is no limit to how far they can go back.

[TorontoCFE]

There isn't any major holes with this approach, depending on how the corporation was set up and the shareholder / employment agreement.

Non-residency means totally severing your ties to Canada - selling property, closing accounts, etc. There is no real time limit if you do it properly but 2 years is kind of the standard.

[sawseech]

1. Distinguishing Between Business and Hobby

· A hobby may give rise to receipts, but these will not be taxable.

· To be a business, at least the following elements are required; otherwise it may be a hobby:

(a) Time, labour, organization;

(b) Reasonable expectation of profit; and

(c) Regular, recurring receipts.

time means regular hours; playing when you "feel like it" does not count
labour means concerted _definably skilled_ effort in a _trade_.
poker has not been classified as a trade in canada.
organization means you need to instigate the moneymaking ie solicit, house, administrate. firing up pokerstars does not count.

reasonable expectation of profit means from an outsider's view, can you be reasonably be expected to win, not whether or not YOU expect to win. tyson was reasonably expected to win vs that fat white guy in his comeback fight. every time i sit down at a table i lose 46% of the time. i can lose 20 mtts in a row. i can lose 20 buyins over 10k hands.

regular recurring receipts follows from organized effort from dedicated time. see above.

now, let me be clear on what constitutes "organizing effort"
having a PT database is not organizing effort; we as hobbyists maintained thorough databases and analyze player actions, timings, weaknesses etc.
this is analagous to a sportsbettor or a birdwatcher.

now, MNR v Morden is the applicable precedent. Morden owned a stable, and bet on horseracing. he had done this for 20 years, assessing his and his opponents' stables, putting jockeys on specific horses in specific situations, anaylzing the weaknesses of specific jockey's on other horses. he then claimed that his betting winnings were not taxable:


(a) Time, labour, organization;

[x] owns and operates a stable. [x] has done so for 20 years. [x] GG.

(b) Reasonable expectation of profit;

[x] expert on horses. [x] expert on jockeys. [x] expert on wagering systems and calulating marginal outcomes based on lines.

(c) Regular, recurring receipts.

[x] never loses and always wins.

running an underground poker game and maintaining books and playing in it is organizing effort

playing in poker tournaments is not

joining a team of poker players and playing on a shared bankroll and exchanging tactics, knowledge about the opposition, arranging to sit together in the same games, entering no-loss arrangements with each other, exchanging equity in tournaments, colluding; altogether this is organizing effort

playing on a shared bankroll and exchanging knowledge is not nor is sitting in the same games (this in fact hurts your equity unless you collude in which case you'll get caught one day and zero'd)

MNR vs Morden is the only applicable precedent and it does not apply to a poker player unless they run a continually running home game and are a provable expert.

if they apply MNR vs Morden to a simgle poker player, then all gambling losses are deductible (hospital lotteries, lottery tickets), just as all gambling winnings are income. all registered gambling entities in canada would then need to issue receipts, for everything.

firing up pokerstars is not organizing effort.

//

things that should concern a winning player:

being part owner or an operator of a major poker site/affilate/publication
being sponsored by a major site
winning a major tournament, and then winning another one, and then writing detailed articles for a major poker publication which demonstrate considerable expertise while also showing no legit income.
being involved in fed indictable criminal activities (drugs, washing)

[-zero-]

One quick question because I'm an income tax noob. Is there some "non-taxable income" section on the forms to put poker winnings in, or do you just not list anything that's not taxable?

[cmyr]

it isn't taxable because it isn't income, and you don't need to tell revenue canada about non-income.


so uh leave it blank.


note: I'm not your tax lawyer.