[fnurt]

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The player is the one who needs to worry, not the backer.

If the backer claims he owns (for example) 50% of the win, he is responsible to his tax jurisdiction for taxes on that amount. If he happens to live in a tax haven, which does not collect on gambling winnings, etc., he has fulfilled his duties.

The envelope returned to the player is a "gift." It is up to the player to report that additional income.

I am not a tax attorney, or an accountant, so I may be way off base. There may be a potential conspiracy to evade taxes, etc. that I am not aware of. However, this seems akin to offshore, tax-free (or reduced tax) shelters.


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We're assuming, for purposes of this thread, that the backer either never takes his 50% share in reality, or kicks it back to the player via some back-channel method. If he just keeps it himself and spends it, then we mostly don't have anything interesting to talk about, and I guess he's just darn lucky that he keeps backing all these winners.

But if he does one of these two things, he's criminally liable for conspiracy or for aiding and abetting under the host country's laws, which pretty much makes him equally culpable with the player. This might not bother him if he never enters the host country's jurisdiction, but if he makes a practice of doing so then he has something to worry about.

This whole arrangement, frankly, strikes me as a lot of work to accomplish something which is no different in effect than any situation where you receive money and then omit it from your tax return at the end of the year. The difference being, if you win money on PokerStars and don't report it, it's unlikely that anyone will ever know. But if you win money in a tournament and use this method to avoid reporting it, you've left a very suspicious paper trail for the authorities to follow. It doesn't strike me as clever at all.