My new CPA says I should file as a corporation???

[DeadMoneyDad]

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Banks arnt crazy about lending money to gamblers.

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that's not true

Many "big banks" like NationPoint don't care at all. Some "small banks" care..but guys like Wells Fargo don't.

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Sub Chapter S corporations are generally designed for family or tightly controled, limited ownership corporations, twenty-five or less shareholders (if this hasn't changed in number only)

So trying to utilize incorporation as a method of avoiding taxes has generally failed I can see the possibility of this being sucessful under the following conditions.

First you are "financed" by a small group of family or other such individuals. While it might be possible to find a bank willing to finance such an enterprise, I find it hard to believe it is a normal or anything other than a remotely logical possibility.

There is nothing stopping anyone from this group from getting bank financing secured by other means of credit or security and thus investing into this enterprise. IMO this is the most likely way to be sucessful in raising reasonable financing.

You can then repay much of your finaincing throught the issuance of various classes of shares if desired to better protect the finaincing individuals as well as distributions to imediate family members like wives and children. Beware the sale and marketability of S-corp shares is highly illiquid.

Fully following the various rules of incorporation and having real "others" with monetary risk might be the reason some have utilized this method of incorporation while others have failed due to the tax avoidance claims.


D$D<-- not a lawyer nor accountant, always consult a proffessional their advice is at least deductable.

[SgtJake]

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Did your cpa mention that if you file as a sub-s corp. and you make a profit you will have to pay yourself a reasonable salary and thus have to pay, you guessed it, payroll taxes. Now you don't have to pay all your profits as a salary, some of it you can take as a tax free distribution. This is where the tax savings lie.

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Yes, I'm pretty sure he mentioned this.

[SgtJake]

Russ,

Honored that you've posted in my thread. "Mastering no limit" was the first poker book I read and the one that helped me the most. Several of my friends have purchased the book on my recommendation.

Back on topic....what is the recommended way to file if your only source of income is from poker? (link?)

[Russ Fox]

Thank you for the kind remarks about Mastering No-Limit Hold'em.

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Back on topic....what is the recommended way to file if your only source of income is from poker? (link?)

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Unfortunately, your question isn't easy to answer. Tax is not a one-size-fits-all profession. It sounds like you're a professional ("all income from poker"), which indicates a Schedule C. But that's not always the case.

The Groetzinger decision governs whether or not you should file as a professional. However, other issues such as your state of residence, whether you gamble online or in casinos, whether you're a full-time student, other businesses, other sources of income, etc. can and do impact how you should file. A professional tax preparer should ask the questions needed to determine what's right for your situation.

It's impossible for me to post an answer to your question. I don't know you, and the full facts of your situation. And without that, I'd just be guessing.

-- Russ Fox

[Legislurker]

The whole point of filing in an OFC is that the corporation pays YOU and buys your house and car. The IRS can't force you to divulge the nature of the corporation or even who owns it.
Especially if the money never comes into the US. Im not saying its "legal" its just a lot of effort on their part to prove illegality that they may totally avoid. Getting the information would take a LOT of time and expense, so as long as you cna account for how you got all yoru assets, or show that the corporation owns it, youre pretty safe, but i wouldnt say ironclad.

[DeadMoneyDad]

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other sources of income, etc. can and do impact how you should file. A professional tax preparer should ask the questions needed to determine what's right for your situation.

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I understand your general reluctance to give tax advice both for free and with out a full understanding of all the facts at issue. You are a professional.

But on one point of "other income" does much depends on the active vs passive nature of the "other income"? In all other regards I feel farily comfortable, but the nature of this source of income compared with the amount of reportable "active on-line (majority) and active live (minority) poker income" vs passive income is the heart of my question.

I couldn't get a straight answer from repeated tries from the IRS.



D$D

[Russ Fox]

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The IRS can't force you to divulge the nature of the corporation or even who owns it

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S Corporation tax returns contain Schedule K-1s that disclose the full ownership of the corporation.

C Corporation tax returns include details of all 50% (or more) owners and all foreign owners. They also list all directors (including their social security numbers).

-- Russ Fox

[Russ Fox]

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But on one point of "other income" does much depends on the active vs passive nature of the "other income"? In all other regards I feel farily comfortable, but the nature of this source of income compared with the amount of reportable "active on-line (majority) and active live (minority) poker income" vs passive income is the heart of my question.

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I'm not sure what you're trying to ask.

If you're talking about "passive income," that's typically things like real estate rentals, and is normally shown on Schedule E.

Gambling income shown as other income (line 21) isn't passive income.

[ChipLeeder]

You can then repay much of your finaincing throught the issuance of various classes of shares if desired to better protect the finaincing individuals as well as distributions to imediate family members like wives and children. Beware the sale and marketability of S-corp shares is highly illiquid.

If you have multiple stock classes in your S Corp, you don't have an S Corp anymore:

S corporations may have only one class of stock but different voting rights are allowed.

Also, they are allowed 100 shareholders now.

[DeadMoneyDad]

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But on one point of "other income" does much depends on the active vs passive nature of the "other income"? In all other regards I feel farily comfortable, but the nature of this source of income compared with the amount of reportable "active on-line (majority) and active live (minority) poker income" vs passive income is the heart of my question.

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I'm not sure what you're trying to ask.

If you're talking about "passive income," that's typically things like real estate rentals, and is normally shown on Schedule E.

Gambling income shown as other income (line 21) isn't passive income.

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Say for '07 all of my non-poker income was passive, would the fact that all my active income change how the IRS determined my need to file as a pro? Yes I am a winning player. Personally I do not think the amount of winnings makes it reasonable, but I could not get the IRS to give me any idea even in the most broad terms of dollar amounts what is the threshold, if there is any.

I would call my poker playing a hobby, as I've spent almost all of '07 having to settle my mothers Estate, but as the Executor, I have much bigger problems with the IRS and bigger exposure. I'm willing to pay the SE taxes, but the poker income is almost insiginifant IMO.

So I am the reverse of the usual case I don't want to file as a pro, given that I play almost exclusively on-line there are no major deductions for me to try and write off. I do use my office for other things, so even a home office deduction helps me little.

I just don't want to have to pay a higher tax because some jerk at the IRS thinks they can get a little more out of me. I have no problem with the tax, it is the penalties and intrest that drive me nuts.



D$D