Awful WSOP news from PokerStars

[adanthar]

[ QUOTE ]
If you win 100000 and pay the entry fee of 10000 out of your pocket, you have a net win of 90000 for that tournament.

If you win 100000 and win your seat with a 215 entry fee satellite tournament, then your net win is 99785.

So in the second case you pay taxes on the 99785 instead of 90000, but you are not out the 10000 (which you probably had to pay taxes on as well).

[/ QUOTE ]

it doesn't work like that

you pay $215, win seat ----> win $10,000
you pay $10,000, win 100K ----> win $90,000

you don't magically win more $ for tax purposes by winning a smaller sat

[MicroBob]

correct.

as i understand it, winning a sat to get in is pretty much the same as winning a regular $200 tourney for a $10k prize and then deciding to spend it all on the WSOP main-event entry.

Only difference in the sat is that they are deciding what to do with the $10k for you ahead of time (except now it appears that Stars actually isn't and you actually do have some choice in the matter).

[broiler]

Adanthar,

Driller is correct that there are different taxable incomes based upon how much was paid to enter. You have forgotten that you are allowed to reduce the winnings by the amount paid for the entry.

The amount of income from a winning bet or wager is the full amount of the winnings less the cost of placing that winning bet or wager. But, a taxpayer can't reduce the amount of income from winnings by the cost of losing tickets (or other forms of wager). Source: Hochman, David,(1986) TC Memo 1986-24. Also, Lutz TC Memo 2002-89 has the same conclusion.

The Hochman case is much clearer on the treatment, but I am unable to find a free site with a link to that case. Lutz is not as clear because the phrase deduction from winnings is used in the same paragraph as itemized deduction for gambling losses. However, it does reference Hochman for the proper treatment of the "recovery of capital".

[adanthar]

[ QUOTE ]
Adanthar,

Driller is correct that there are different taxable incomes based upon how much was paid to enter. You have forgotten that you are allowed to reduce the winnings by the amount paid for the entry.

[/ QUOTE ]

right, but you didn't pay $215 for the entry, you paid 12K. it doesn't matter whether you bought in directly or won a sat - the sat just paid you 12K that you have to use on a WSOP entry. to argue otherwise would mean that the site gave you a magic ticket to the WSOP with no other inherent value, which was probably wrong last year (it's very clear what the value of the ticket is) and is definitely wrong this year since they simply give you cash.

if you prefer, imagine you're playing the Party Steps. you originally bought in at Step 1 for $10 and eventually, 43 SNG's later, made it to Step 5, with a $1K entry. but wait - Party quit the US and refunded everyone's freerolls for face value! did you win "a magic ticket with no inherent value" or $990?

[broiler]

I think that you are misunderstanding my interpretation of driller's statement.

A person that gets into a tournament via satellite will have a larger taxable income for the entire tournament process than a person that buys in directly. They will both win 90k for the tournament proper, but the satellite person also has the income from the satellite win. We have no idea where the person that bought in directly got their money from, so it is not being considered a part of the tournament process.

I didn't want to get into your magic ticket point from the prior year because that point has been incorrect throughout this thread. In the past, the WSOP entry had no taxable value if it was a non-transferable, non-refundable seat. There is no taxable event (constructive receipt if you like) when you must cash in the event in order to get anything of value.

I agree with your statement that in the current situation there is a taxable event when you receive the 10k cash to enter the tournament and then another taxable event when you eventually cash in the tournament.

[adanthar]

[ QUOTE ]
I think that you are misunderstanding my interpretation of driller's statement.

A person that gets into a tournament via satellite will have a larger taxable income for the entire tournament process than a person that buys in directly. They will both win 90k for the tournament proper, but the satellite person also has the income from the satellite win. We have no idea where the person that bought in directly got their money from, so it is not being considered a part of the tournament process.

[/ QUOTE ]

Oh, yeah I see what you mean. But that's only important if you're an amateur living in a no gambling deduction state. Pros don't care since we net everything, and regular amateurs won't be affected unless they hit the AMT (in which case they should just file as a pro in the first place.) So ultimately, isn't this rather irrelevant?

[bav]

I've been told by several winners and floor people that Harrah's doesn't give out 1099's or W2G's to folks who win main event seats in their freerolls. (Still trying to win a seat myself.) The claim is because they aren't winning cash, but rather just an entry into a tournament which is non-refundable, non-transferable, yaddayadda, that it ain't reportable (or some such, anyway).

Kinda sounds from that like if you win a freeroll tourney and get a seat to the main event, and bust out of the main event with no cash, there are no taxes to be paid on the entry you won. Maybe?

[MiltonFriedman]

I do not see how this "cash versus bought entry" changes anything taxwise. A "bought entry" was a $10,000 win, correct ?

Keep in mind that Harrahs has a record of your prior "bought entry" prize, and your personal information ... but I am sure you included its value in your past tax filings.

[Russ Fox]

[ QUOTE ]
I do not see how this "cash versus bought entry" changes anything taxwise. A "bought entry" was a $10,000 win, correct ?

[/ QUOTE ]

For the professional player, this is true. First, there are two ways to handle satellite wins. In a true satellite, you win an entry into a larger tournament. Assume that we're talking about the WSOP main event, and you enter a $500 satellite, and win a $10,000 entry. You could (a) have a net $9500 win, or (b) consider that you have won the first part of a parlay bet.

Anyone using method (a) will have a $9,500 basis into the WSOP main event, where if you used method (b) you would have a $500 basis. I prefer the second method, as there are fewer tax complications. [Note: This is being presented as a general discussion on this issue. You should discuss this with your own professional tax adviser, etc.]

You can't use method (b) if you're paid cash for the satellite win. No longer are you required to play the event; it's not a parlay bet. You have a $10,000 gross win ($9,500 net win using my example). You must report the $10,000 win ($9500 net) on your tax return.

As I said, the professional isn't impacted by this. Professionals net their wins and losses, so as long as the professional plays the WSOP, it's irrelevant.

However, for the non-professional it matters a lot. Amateurs are not allowed to net their wins and losses. Wins go on line 21 of Form 1040 (Other Income) while losses are an itemized deduction not subject to the 2% AGI limitation.

This impacts amateurs in two ways. First, those who live in states where gambling losses are not allowed or are severely restricted will pay tax on the $10,000 win (e.g. Massachusetts) no matter their result in the WSOP. Second, other deductions are tied into your Adjusted Gross Income (AGI). These include other miscellaneous itemized deductions, IRAs, medical deductions, etc.

-- Russ Fox

[jeramy576]

[ QUOTE ]
Any predictions on the number of entries in the Main event this year? Due to Harrahs thrid party rule im guessing 5900

[/ QUOTE ]

ok how did you arrive at this number?