Taxes in Canada?

[Pog0]

[ QUOTE ]
so much speculation and no real solid answers...

im not going to pay taxes this year (made about 50k in 2006.)
im going to wait until next tax season and re evaluate my situation. mean while, ill be keeping money made from poker in my bank account. should be interesting to see if i get any phone calls from revenue canada in the mean time.

on a related note, my dad owes them 100k and has no plans on paying them any of it.
good role model....

[/ QUOTE ]

I doubt you raised red flags like other posters have said.

I agree 100%. Too much speculation and no real answers. But why would anyone pay taxes when it's not clear that you have to?

Also, in response to tax estimates in this thread, people are forgetting to factor in CPP which can be up to about $8k for the self-employed. It hurts big time. Fortunately, you can creatively deduct computer equipment, internet connection, poker books, etc... so keep your receipts as well as your money.

I'd still love to hear comments on my interpretation of the tax code.

[RaiseAndPray]

I printed out your interpretation and am bringing it to my accountant tomorrow.

I have about 250k in poker winnings to account for over the past 3 years, from a variety of things (online and live cash games, few $10-$15k tournament cashes). Since December, I'm probably down 50k online and live together. I made the vast majority of my winnings (at least $150k) between July - December 2006 and maybe 50k each of the 2 years before. I don't know if anything I've said here affects my situation differently or increases my chances of making it look more like a windfall (???). I'm just very confused and want to avoid paying tax as much as possible since I honestly don't have that sort of money available (this recent 50k downswing has really dented me). Is it really realistic for Revenue Canada to tax me on something I did ON AVERAGE about 15-20 hours/week, and haven't won a penny at in 5 months?

I'd be interested in any comments. I've found this thread helpful and informative.

Edit: oh, and I was auditted about 3-4 years ago for an old business and had to pay $50k. that's only really relevant because it guaran-f'ing-tees I will get auditted again if I don't do anything about it and keep claiming more-or-less $0.

[Pog0]

It probably goes without saying, but I'm very interested to hear what your accountant has to say.

I'm also wondering, are there even any somewhat relevant court cases that we can refer to when trying to figure this out?

[AAxxCracker]

[ QUOTE ]
It probably goes without saying, but I'm very interested to hear what your accountant has to say.

I'm also wondering, are there even any somewhat relevant court cases that we can refer to when trying to figure this out?

[/ QUOTE ]


The following link is not about poker but the court case is of the Leblanc brothers who gambled millions over time on sports lotteries. Their "hobby" grew so big that they had to hire runners to go to different lottery outlets as these outlets could only accept a certain number of bets. Canada argued that it was a business with employees and it was run in a systematic way to have an expectation of profit. These brothers had a computer program to help them with their picking. Anyway, there are some interesting points in this case about what is gambling and what is a business and what is a hobby. Verdict: NOT GUILTY.

http://decision.tcc-cci.gc.ca/cgi-bin/si...g&langue=en

I haven't used a link here before so if it does not work copy and paste this: decision.tcc-cci.gc.ca/cgi-bin/sino/disp.pl/en/2006/html/2006tcc680.html?query=gambling&langue=en

[bmxicle]

the HUGE difference is that canadian sports betting is government run, and all those government run gambling things (lotteries etc) are generally non-taxable. I think that was a huge part of that case.

[sumdumguy]

[ QUOTE ]
[ QUOTE ]
It probably goes without saying, but I'm very interested to hear what your accountant has to say.

I'm also wondering, are there even any somewhat relevant court cases that we can refer to when trying to figure this out?

[/ QUOTE ]


The following link is not about poker but the court case is of the Leblanc brothers who gambled millions over time on sports lotteries. Their "hobby" grew so big that they had to hire runners to go to different lottery outlets as these outlets could only accept a certain number of bets. Canada argued that it was a business with employees and it was run in a systematic way to have an expectation of profit. These brothers had a computer program to help them with their picking. Anyway, there are some interesting points in this case about what is gambling and what is a business and what is a hobby. Verdict: NOT GUILTY.

http://decision.tcc-cci.gc.ca/cgi-bin/si...g&langue=en

I haven't used a link here before so if it does not work copy and paste this: decision.tcc-cci.gc.ca/cgi-bin/sino/disp.pl/en/2006/html/2006tcc680.html?query=gambling&langue=en

[/ QUOTE ]

And you know what is really cool about this case: The extra effort the judge makes to distinguish, irrespective of effort and organization, simply beating the odds vs. gambling with positive EV.

[48] This conclusion is consistent with the case law on gambling. 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. <u>Nor are they like seasoned card players or pool players who prey on unsuspecting, inexperienced opponents.</u> Rather, they are more accurately described as compulsive gamblers, who are continually trying their luck at a game of chance.

[pyedog]

Pog0, thanks for doing that analysis of the tax code and how it applies to you. I think your analysis is quite reasonable, but you might be biasing your points towards the conclusion that you desire. Then again all legal arguments are done this way.

I have a similar situation to you except that I have a full time job instead of being a student. I am also curious if anyone receives more concrete advice from an expert accountant or if anyone has ever been forced to pay taxes on poker winnings. I don't want to just pay taxes like a sucker if it is debatable and avoidable.

[SlightlyMad]

There are no known cases where a poker player has been forced to pay that didn't get turned over on appeal (see the Canadian Tax Thread in the Zoo for more information on the Russian dude from Hull).

Since most of you aren't going to pay (in spite of my arguments for why I think you should consider doing it), I hope that you don't get audited and you may want to consider keeping your bankroll out of your bank.

PogO, let's just say that I disagree with your assessment:

(a) Why does using PT and PAHud be considered as making the game more fun? Because you can be more *profitable* when using them? A system that keeps track of players' tendencies so that you can EXPLOIT them in later hands sure sounds like organization to me. Do you have a logbook of deposits and withdrawals? Are you systematically depositing for every single bonus? (Some low-limit bonus whores such as myself would say "Yes" to this, but you probably earn too much to chase that stuff.) Organization isn't necessarily about setting yourself a schedule.

(b) Read sumdumguy's response on the decision from the judge. My guts tell me that you are a "seasoned card player ... who prey[s] on unsuspecting, inexperienced opponents" rather than a random chucklenuts. Should we read your posts on this message board and figure out whether you're giving/getting advice on how to play hands? Is anyone thanking you for your insights?

(c) If you have no other money coming in, how do you intend on buying food? By purchasing stuff from your gambling wins. If you could somehow justify that your expenses can be accounted for WITHOUT any gambling income, I'd buy this argument. However, since you have no other income coming in, this feels like crap.

(d) You're not doing it full-time, that's good; you're working on school work most of the time, and only doing this part of the time. If there is any part of this that is likely to fall in your favour, it's this one. (However, it is important to note that your log of how many hours you have been betting shows "organization".) I play about 3 hours/night, but I work 9 hours a day.

My employment $ &gt;&gt; poker $, I have a full-time job, and that's why I'm not paying. But if it ever became clear (from a Revenue Canada ruling) that I *do* have to pay, and pay on previous years (instead of a ruling that applies going forward), I would voluntarily adjust my previous years' tax returns to pay, because I squirreled most of the winnings away! If I luckboxed my way into a WSOP Main Event win, my poker $$ &gt;&gt; employment $$, and I would pay Canadian tax on my tournament victory. (However, before I did that, I would probably sit down with Revenue Canada officials and try to get an official ruling on tournament poker since it would mean a $4-$5 million tax bill.) Screwing the Canadian government out of tax revenue is highly -EV.

[TorontoCFE]

That only applies if you have been evading tax.
A lawyer can go to the CRA and haggle a settlement of your liability.
You then pay this settlement and avoid criminal prosecution (unless that'S part of the settlement).
You may get a discount on the total bill, but you still pay.
All deals are off if they start investigating you on their own before the deal is final.

[Pog0]

Pyedog,

I definitely wrote my interpretation with extreme bias. I want to be right here and I don't want to pay taxes, but I don't have any intention of cheating the government if I find that I have to pay. I wrote my interpretations with the hopes that someone would refute them from the other point of view and we could all come to a better understanding of what the taxcode really means.


SlightlyMad,

your critique of my analysis is very good. I appreciate you taking the time to do that. What I think is the biggest difference between my interpretation and yours is the definition of a few key words.

For (a), you say,
[ QUOTE ]
Organization isn't necessarily about setting yourself a schedule

[/ QUOTE ]

Yes that's true. Maybe it's not. But if it is, then I've got a strong case against a. It's all in what they mean by the word 'organization'.

For (b), we're disagreeing on the term 'element of chance'. I'm saying that I don't reduce the variance, keeping winrate irrelivant. Although, if you start looking at the longrun, winrate seems to lower the element of chance, so I may have some trouble proving that point, even if I were convincing in claiming that "reducing the element of chance" has nothing to do with "increasing the chance of winnings". So then I'd have to rely on the definition of "special knowledge" and claim that I don't know anything that isn't publically knowable, and I believe this is true.

If I learn something from a book that's for sale at amazon and most book stores, is this special knowledge? Is I learn something from a publically accessible forum, is this special knowledge? If I learn something through trial and error by simply playing a lot of hands, is this special knowledge? I don't think my knowledge is all that special at all.

(c) I'd probably have to conceed this point since I am gaining a livelihood through gambling at the moment. However, once I have a business with which I can support myself, then I can get this point turned back to my favour. I'd still argue that I gamble for pleasure and hope that that somehow makes (c) work less against me.

(d) Again, for this point, I don't think the pursuit of other activities is at all relevant. It shouldn't be any different if I'm a full-time student and I play poker 10 hours a week or if I watch movies and play computer games all day and then play poker 10 hours a week. The terminology here doesn't seem to apply (number and frequency of bets), so at the very least, this point can't work against me, but I hope it works for me whether I'm a student / have a full-time job / or none, as long as I'm only playing poker a few hours a week.

*

Yes, I know my interpretations are extreme, but I don't think I need to win all of these battles in order to win the war, since "no one factor may be conclusive"

Your interpretations are completely reasonable and it all really comes down to the definitions of a few key words and phrases. Mainly,

organization
special knowledge / inside information
element of chance
number and frequency of bets

Rereading "(c) the taxpayer's intention to gamble for pleasure as compared with any intention to gamble for profit", I see that the word compared between the two essentially means that you have to show which was more important to you: the pleasure or the profit. If you can show that the pleasure was more important, than you win c. I don't think I can win c.