One-Time Stakes and Taxes
 

I'm sure this has been discussed somewhere on these boards before, if not specifically in MTTC. If someone has a link to a good explanation, that'd be helpful. As it is, every time I ask a reputable source about this, there doesn't seem to be a single right answer.

Let's say someone is being partially staked for a $10K WPT tournament. For argument's sake, we'll say the staker is providing $5K of the entry and in return will receive 30% equity in the stakee's winnings.

The stakee goes on to win $100K. Here's where it gets hairy. Now I may be mistaken, but I assume that the IRS expects the tournament entrant to pay the entire tax obligations as if he/she won the entire $100K, and doesn't care to get invloved in what happens to the money afterwards. Or is there actually staking paperwork that can be filed so that the stakee is only responsible for paying the tax obligation on the $70K and the staker is responsible for paying the taxes on his $30K?

If the IRS doesn't make it convenient for us (which they have a habit of doing), then how is the tax obligation typically handled? Does the stakee first take out the estimated taxes from the winnings and only pay the stakee his cut of the remainder?

Lastly, how does that new law that requires taxes on tournament winnings to be withheld from the payout play into all this?

CLIFF'S NOTES: Run good and don't get married so you never have to be staked

Re: One-Time Stakes and Taxes
 

Assume said stakee does not file quarterly, if that affects anything.

Re: One-Time Stakes and Taxes
 

My accountant told me to give the gross cash to the backers and have them fill out a specific form at the end of the year to give to me saying they're paying for their part of the money. That was the best way to handle it she said.

Re: One-Time Stakes and Taxes
 

Rob,
I am pretty sure it can be done two ways.

1 - Staker gets 30% of post tax winnings (pretty easy to set aside 30%)

2 - There are forms you can get at a casino which push some of the tax liability from a win to a 3rd party. It is called a "partnership form" or something along those lines.

Re: One-Time Stakes and Taxes
 

[ QUOTE ]
Rob,
I am pretty sure it can be done two ways.

1 - Justin gets 30% of post tax winnings (pretty easy to set aside 30%)

[/ QUOTE ]

FYP

Whenever you're ready man... [img]/images/graemlins/grin.gif[/img]

Re: One-Time Stakes and Taxes
 

1)there are forms for this (the casino should fill these out for you but may require the staker to be present)

2)the new tax regs were withdrawn, don't worry about them

3)the best way of handling this sans the #1 form is probably to write a contract spelling this out in advance, give everyone involved a copy for their records, then just do what it says.

note that doing "X gets a cut of the post-tax winnings" is really dumb for at least one of you (the one who has way less in income than the other guy.)

Re: One-Time Stakes and Taxes
 

Casinos are supposed to provide a form, I forget what it's called, at the time they payout the money on which you indicate what % is going to whom. Casinos often illegally refuse to do this.

Assuming this didn't happen, everyone is responsible for paying taxes on their own income -- the stakee's chunk goes into the stakee's gross gambling earnings, the staker's chunk goes into the staker's gross gambling earnings. Under no circumstances should the stakee pay the taxes on the full winnings.

The only issue is whether the stakee has an obligation to fill out a 1099 or some similar form informing the IRS of the identity of the staker and the amount paid to the staker. In the absence of a lawyer advising me I absolutely did not have to, I would if I were the stakee. There was a thread about this a while back in which adanthar (I think) and I discussed this issue.

Re: One-Time Stakes and Taxes
 

Worst case scenario... let's say the forms are not filled out beforehand, a contract is not drafted, and the staker simply takes his gross cut and has no intentions of paying his tax obligation. Stakee is screwed for being stupid? I assume the burden of proof falls on the stakee to show that he did not receive all the winnings.

Re: One-Time Stakes and Taxes
 

staker has no intentions of paying taxes?
I got staked by timex/steve for barcelona, and neither of them are paying American taxes, but I just got contracts from both of them (after the fact) saying that they staked me with the agreement that they'd get x% of the winnings, thus it was never my money so I don't have to pay taxes on it.
If your stakee is planning on just shafting you uh... find a better staker?

Re: One-Time Stakes and Taxes
 

but yes, burden is on the stakee I would assume