Two Plus Two Publishing LLC Two Plus Two Publishing LLC
 

Go Back   Two Plus Two Poker Forums > Other Topics > Business, Finance, and Investing

Notices

Business, Finance, and Investing Making money, investing in markets, and running businesses

Reply
 
Thread Tools Display Modes
Old 09-13-2007, 01:05 PM   #1
Pooh-Bah
 
Join Date: Mar 2005
Location: Las Vegas
Posts: 3,507
Incorporating yourself as a Professional Gambler:

My Las Vegas based accountants who do not specialize in professional gambling, but represent a few professional gamblers; recommended I set up a S-Corp to tunnel my gambling income through. They said this would save me money, had some extra legal protections and make them more money (cost money to incorporate, cooperate taxes more expensive then schedule C). So this how I was planning on filing this year but now I have some cause for concern.

I recently finished reading “How to turn your poker playing into a business” by Ann Johnston, CPA. In the FAQ at the end of her book in the FAQ it says,

“Q: I am a pro. Can I incorporate myself?

A: A person that is a professional gambler cannot incorporate themselves. There are many court cases where professional athletes have wanted to do this. The IRS feels that you are a personal service that you cannot have someone else perform, such as Michael Jordan cannot get someone to take his place. The same goes a pro that is not able to “substitute” their ability with someone else.”

I for one think that successful poker/blackjack skills are learned skills and not one that requires that much innate ability. I think with enough studying (comparable to the amount to achieve a though college degree), anyone can become a successful gambler and take my place in the corporation. I’d say being a professional gambler is somewhat similar (albeit easier) to running an investment fund which obviously file as corporations (this is at least a closer comparison then calling me a professional athlete.)

But what I think doesn’t really matter; has there been any cases where the IRS has taken a professional gambler to court for incorporating themselves and any CPAs/Attorneys have anything to add? Also anyone know a better forum to post this?
good2cu is offline   Reply With Quote
Old 09-13-2007, 01:35 PM   #2
adept
 
Join Date: Jan 2005
Location: West Coast
Posts: 705
Re: Incorporating yourself as a Professional Gambler:

talk to a CPA
jono is offline   Reply With Quote
Old 09-13-2007, 01:41 PM   #3
Real Estate Mogul
 
Join Date: Jun 2005
Location: who dares wins
Posts: 1,611
Re: Incorporating yourself as a Professional Gambler:

I'm not a tax expert or anything, but I can't see what you gain my incorporating. My understanding was that corporations are subject to double taxation, i.e., the corporation is taxed on earnings, and the income drawn from the corporation is taxed as income tax. I might be wrong about that though.
spex x is offline   Reply With Quote
Old 09-13-2007, 01:48 PM   #4
Pooh-Bah
 
Join Date: Mar 2005
Location: Las Vegas
Posts: 3,507
Re: Incorporating yourself as a Professional Gambler:

Quote:
talk to a CPA
Did you read my post? I did talk to and have a CPA. The CPA who authored this book and specializes in taxes for poker players disagrees (and i sent an email to my cpa simlair to this post). I am just wondering if anyone else had any information.
good2cu is offline   Reply With Quote
Old 09-13-2007, 01:48 PM   #5
Pooh-Bah
 
Join Date: Mar 2005
Location: Las Vegas
Posts: 3,507
Re: Incorporating yourself as a Professional Gambler:

Quote:
I'm not a tax expert or anything, but I can't see what you gain my incorporating. My understanding was that corporations are subject to double taxation, i.e., the corporation is taxed on earnings, and the income drawn from the corporation is taxed as income tax. I might be wrong about that though.
The main goal is to save money on self-employment taxes.
good2cu is offline   Reply With Quote
Old 09-13-2007, 02:50 PM   #6
grinder
 
Join Date: Dec 2006
Posts: 669
Re: Incorporating yourself as a Professional Gambler:

Just move to Monte Carlo. Its a nice place to live.
APXG is offline   Reply With Quote
Old 09-13-2007, 03:01 PM   #7
Carpal \'Tunnel
 
Join Date: Jul 2004
Location: investing
Posts: 8,193
Re: Incorporating yourself as a Professional Gambler:

Quote:
Quote:
I'm not a tax expert or anything, but I can't see what you gain my incorporating. My understanding was that corporations are subject to double taxation, i.e., the corporation is taxed on earnings, and the income drawn from the corporation is taxed as income tax. I might be wrong about that though.
The main goal is to save money on self-employment taxes.
This doesn't really work. S-corps are for businesses where there are appropriate pay scales. For example, if you owned a dry cleaning business, you could pay yourself 60K/year because that is what a dry cleaning manager would make roughly. So if your business made 100K, you can shield 40K from self-employment taxes.

That doesn't work for poker because you can't go and get hired at a fair wage. There is no industry standard. I believe the IRS frowns on people incorporating as an S corp and paying themselves a salary well under the total income of the corp in situations like these. This is ahy pro athletes can't incorporate and pay themselves 100K when they earn millions.

I'm no expert, just sharing what I've learned.

Krishan
krishan is offline   Reply With Quote
Old 09-13-2007, 03:04 PM   #8
Carpal \'Tunnel
 
Join Date: Jul 2004
Location: investing
Posts: 8,193
Re: Incorporating yourself as a Professional Gambler:

Oh and the legal protection is useless. IF you run a real business, you generally have some liabilities which under a LLS has some personal risk. That's not true of conventional professional gamblers. Ask you CPA the specific legal protections afforded by an S corp and you should see you don't need them.

Krishan
krishan is offline   Reply With Quote
Old 09-13-2007, 03:13 PM   #9
adept
 
Join Date: Jan 2005
Location: West Coast
Posts: 705
Re: Incorporating yourself as a Professional Gambler:

Quote:
Quote:
talk to a CPA
Did you read my post? I did talk to and have a CPA. The CPA who authored this book and specializes in taxes for poker players disagrees (and i sent an email to my cpa simlair to this post). I am just wondering if anyone else had any information.
Sorry I wasn't clear. Either get a 3rd opinion and/or talk to one who knows for sure.

My initial feeling is to agree with Ann and Krishan (I have no tax accounting experience)
jono is offline   Reply With Quote
Old 09-13-2007, 04:21 PM   #10
Pooh-Bah
 
Join Date: Mar 2005
Location: Las Vegas
Posts: 3,507
Re: Incorporating yourself as a Professional Gambler:

I’m starting to feel that my cpa had me incorporate just to make her some extra money (She also runs a business that sets up all the corporate papers). Needless, to say this makes me pretty angry. Will see what she says in response to my questions.
good2cu is offline   Reply With Quote
Old 09-13-2007, 04:32 PM   #11
Pooh-Bah
 
Join Date: Mar 2005
Location: Las Vegas
Posts: 3,507
Re: Incorporating yourself as a Professional Gambler:

Krishan,

Great information, much appreciated.

The counter-argument would be that I work as more like an investor and trader. I am supplying capital to make trades as well as executing them. It’s standard in this industry for backers/stakers/investors to put up all the capital for professional players to play in exchange for 66% of the total profits (and eating all the losses if they do incur). So it would make sense for me to be only paid, "25-33%" of my winnings. This is quite different from a professional athlete who is merely paid a salary and can’t lose money.
good2cu is offline   Reply With Quote
Old 09-13-2007, 04:40 PM   #12
Carpal \'Tunnel
 
Join Date: Aug 2002
Location: montana usa
Posts: 10,119
Re: Incorporating yourself as a Professional Gambler:

are you sure you want to be a professional gambler. you probably make money at other things as well. and can be a professional at them.
Ray Zee is offline   Reply With Quote
Old 09-13-2007, 04:46 PM   #13
Carpal \'Tunnel
 
ahnuld's Avatar
 
Join Date: May 2005
Location: buy side
Posts: 16,666
Re: Incorporating yourself as a Professional Gambler:

I was thinking about doing this next year when I have to start paying taxes on my gambling income, but im pretty sure in Canada you wouldnt incorporate yourself but start a business for yourself. Pretty sure they are different, and since you will never have any liabilities I dont see the advantage of a limited liability setup (aka a corp.)
ahnuld is offline   Reply With Quote
Old 09-13-2007, 05:11 PM   #14
Carpal \'Tunnel
 
Join Date: Jul 2004
Location: investing
Posts: 8,193
Re: Incorporating yourself as a Professional Gambler:

Quote:
Krishan,

Great information, much appreciated.

The counter-argument would be that I work as more like an investor and trader. I am supplying capital to make trades as well as executing them. It’s standard in this industry for backers/stakers/investors to put up all the capital for professional players to play in exchange for 66% of the total profits (and eating all the losses if they do incur). So it would make sense for me to be only paid, "25-33%" of my winnings. This is quite different from a professional athlete who is merely paid a salary and can’t lose money.
Heh. I thought those thought but from another line. I wanted to shelter the bankroll portion of my winnings. Because it's capital tied up in the business, and without it I wouldn't have a business, wouldn't it make sense for me to only pay taxes on winnings excluding a reasonable bankroll? Unfortunately, the IRS doesn't look at it this way. And it's the IRS that makes the rules.

I must point out that in the situation you describe, the backer would presumably pay taxes on the 66% of winnings. Since you are essentially your own backer wouldn't you still be responsible for the whole thing?

Krishan
krishan is offline   Reply With Quote
Old 09-13-2007, 05:27 PM   #15
banned
 
TheMetetron's Avatar
 
Join Date: Oct 2004
Posts: 7,549
Re: Incorporating yourself as a Professional Gambler:

krishan,

Any of this change if I incorporate offshore and hold my accounts there? I get the feeling this approaches an illegal tax shelter though.

I really want to truly expatriate myself more and more every day
TheMetetron is offline   Reply With Quote

Reply
      

Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off



All times are GMT -4. The time now is 12:14 AM.


Powered by vBulletin®
Copyright ©2000 - 2014, Jelsoft Enterprises Ltd.
Content Relevant URLs by vBSEO 3.6.0 ©2011, Crawlability, Inc.
Copyright © 2008-2010, Two Plus Two Interactive