Ok, so here's where I'm at.

I've played roughly 4 - 5m hands of poker, and achieved Supernova Elite status twice.

I'm looking to understand whether or not I'm actually taxable according to the law - not whether or not I would win in court. I have no doubt that I could win my case should it come to that.

I was originally legally advised years ago about paying tax, and I followed that advice. That resulted in paying taxes in the 6 figure area. I have moved on from full time poker playing, and am currently starting up a small business which is unrelated to poker.

I was contacted last year with a fresher understanding of my taxability according to the law, and was told that I'm not taxable.

I've read relevant parts of the Income Tax Act, and many cases that involve gambling in some way.

I have all of the "evidence" against myself. I have millions of hand histories. I was there for every moment on the tables and away from the tables. No one can be more of an expert on my case than myself.

If it is so simple to show that I'm taxable with hand histories, then I want to know how. As of now, I can find nothing that legally binds me to taxability for any of my poker playing, and there seems to be overwhelming precedent that shows even a seemingly extreme case such as mine is simply not taxable.

I believe that I am entitled to a full refund + interest from the CRA.

Hi bright_sensor,

I have a similar story, and I understand how you feel. The conclusion that I've come to is that we are entitled to a refund for as long as the CRA continues to fail in court. I agree with you and others in this thread that it will be far more difficult for the CRA to mount a successful case than what Henry is suggesting.

ibavly,

I think the problem is the word system. When people hear system they think something like a card counting technique in blackjack or something that if you follow these steps you'll have an advantage -- that is not what system means in this context. It has nothing to do with the way someone played a specific hand or a set of rules to play hands. I would suggest a better word would be strategy -- does the player have a strategy and the answer is that all professional players do.

For example when I used to play poker if CRA wanted to be successful against me these would be the elements that they would procedure as evidence that I had a system / strategy.

1) Driving to specific games in a specific pattern

2) Player selection -- going to games based on who was present, sharing and receiving information about specific players, going out to a game but leaving if the players present were too tough, at venues with multiple tables asking for table changes based on players, asking for seat changes, where I had any influence -- influencing who got credit and who didn't, inviting bad players to private games, etc.

3) Using physical advantage -- poker now has a lot of young people but back then there were hardly any and the average age was probably slightly over 50. Encouraging drinking and playing long sessions till the sun came up was a huge advantage for the few younger players.

This would be enough to constitute a system. It would be really difficult for CRA to establish any of this since as a B&M player who mostly played underground games there really is no record of it. In Epel which was also a underground B&M case the decision came down to the guy who owned the game. The host (who does pay income tax on his poker winnings) said that Epel was not a professional. Had Turmel's testimony claimed Epel's behaviour had the characteristics of a professional then the decision would have been that Tony's winnings were taxable. Of course Tony never would have put John up as a witness if John was going to say that he was a pro and CRA never would have been able to find witnesses.

With online poker though everything is different -- all behaviour that a player does is recorded. It would not be difficult at all to establish that a player has a system / strategy. Your point about nosebleed stakes is valid and they would be the hardest since the strategy would be likely be more complex and the sample size smaller. It is possible that the sample size would be too small but for any player with a sufficiently large data pool someone who understands poker and stats can pull out a player's system.

Just to be absolutely clear -- system does not mean something that everyone or even a majority of players would agree is good. It means only that an effort is spent doing a series of behaviours that the specific player believes is beneficial. Returning to my B&M play even if I was completely wrong about the softness of the games I choose and I was driving hundreds of KMs for nothing that doesn't change the fact that I put thought into and decided on a specific course of action that I believed would increase my winnings. That is all that is required.

ShaunHunting,

You're free to think that but nothing I said was out of line. He came in acting like a immature brat and wanting to be hostile on a topic he is not even remotely qualified to comment on -- being called a ****** and told to **** off is the only response he could have expected.

Sure, but this argument isn't much different than saying someone is a professional poker player for having two eyes and a mouth. Yeah, all professional players have two eyes and a mouth, but so do recreational players.

Professional may or may not have a strategy, but this does not separate them from recreational players.

But it is not enough to show that the system has any expectation of profit. These are all ideas that both professionals and recreational players employ.

It seems that the line between recreational players and professionals was possibly obvious and easy to discern in your case. This is not the case in modern poker.

Pretty sure that it has been shown in court that believing you have a strategy to beat poker is not good enough to claim tax deductions, yet you want to use that argument on the other side.

The problem with your strategy arguments is that they do nothing to separate recreational players from "professionals".

Most strategies in poker do not have an expectation of profit, which is why I don't think your argument here holds any water.

Your theory that merely showing a strategy existed in the mind of a player makes them taxable is silly, and has been shown to be invalid. It takes much more than that.

I've been a poker coach in the past, and through that I've learned that any strategy I may have thought was "good" is never enough. I was never able to fully communicate everything I know about how to win at poker.

Which means that even when I thought I had a working strategy to win at poker with, there was more to the story than I realized. There's something about how I played poker that led to winning that is outside of the realm of a strategy that can be discussed.

The wide range in success and understanding of my ideas showed me that having a strategy, even if it's seemingly a very good one is not enough to have an expectation of profit.

Henry,

My understanding is that having system isn't enough to be taxed because recreational players can also have a system. Why wouldnt a serious hard-working losing player be able to deduct loss in this case?

Also all your examples, traveling, game selection etc it is unclear to me having hhs would be relevant

Because you also need a reasonable expectation of profit. Someone who was a successful player but had a bad year and lost would be able to treat the loss as a business loss

It is important because it can be used to establish the characteristics of the tables the person played at as well as who they played with.

For example lets say you only played at a table that had at least two fish. So what CRA would be looking for is the number of times the average player ends up with 2+ fish vs the number of times you do. They would also look at when the fish went bust / left the table and when you left.

Say you only played on tables with a VPIP of 30+ again there is a statistically expected behaviour of a casual player and there is the behaviour of someone who is using VPIP to select tables.

Given the stakes and time of day you play there is a statistical expected number of times that you should end up at a table with a given player. If we analyze the hand histories and find 50 players that you play a statistically abnormal amount of time then you're targeting these players.

Obviously it gets more complex when there are multiple variables but I'm using single variables just to keep the examples simple. The same analysis could be done where the strategy involves multiple conditions.

If we leave hand histories and move to the player's computer we'd have software and system logs to get info about how that software was used. Reports, study material, 2p2 strategy postings, etc

No single thing is going to be enough but if CRA provides this type of evidence for a winning poker player CRA will be successful. Every single poker decision has made it clear that what the court wants is evidence that the winning player took specific steps to increase his chances of winning. It doesn't matter if the steps are ideal or even accepted by most players as beneficial - all that matters is that the player thought these behaviours would increase his chances of winning and he did them.

How could it be shown that one strategy has a reasonable expectation of profit, but not another?

Many personal endeavour type players would be falsely implicated here.

Many personal endeavour type players would be falsely implicated here.

It is common to see players with strategies with no reasonable expectation of profit show this behaviour.

Casual players watch training videos, use software to assist their play, and make strategy posts on 2p2.

The argument to taxation must remain irrelevant to whether the player is a winning one or not.

The player thinking their behaviour would increase their chances of winning is not enough.

Link: Cohen v. The Queen

Cohen took many steps to increase his chances of winning, and had seemingly very good reason to think that he had a reasonable expectation of profit. This was denied, and provides case law to support that simply thinking one's actions are profitable, or that they have a working strategy is not a viable route to transfer someone from a personal endeavour to a business.

Results?

You're welcome.

bright_sensor - I am available for consultation.

henry17 - you are mistaken in thinking Lupypra is the guide for CRA to win successfully in Tax Court or Federal Court. In my judgment we cover many of those points and why they are irrelevant.

Not at all. My case dismissed a) directly as all players attempt to "manage risks" and pursue profit. b) good luck proving that c) irrelevant d) irrelevant, hobbyists do the same e) this could hold water however obviously if you play online this can't really occur f) I proved session winning percentage irrelevant in my case g) is related to e), h) like a) and b) good luck proving that, and i) I proved this point irrelevant in my case.

So yeah, the CRA is not winning with an argument based on this.

Did I miss something? Are you Peter Radonjic?

On reflection, I happen to disagree with Henry17 on how this would go in the TCC - and I think people who have paid taxes on winnings should consider applying for reimbursements (I'm not a pure tax lawyer so I'm not sure exactly how that works)

But brightsensor's arguments are awful (for clarity, a court would not take them seriously, he's not applying law to fact, and he's devoting a lot of time to peripheral points).

There's nothing more frustrating than non-lawyers playing lawyer.

That's how I feel when lawyers talk about poker... this seems like a good place to meet in the middle though.

Your situation is not a tax case. It is a judicial review of the reasonableness of CRA's decision to not allow you to modify your taxes. It is completely irrelevant to the issue of taxation except that the reasoning does act as a summary of actual tax court decisions. Even there though the summary is in the reasoning of a judge that is not a tax judge relying on the research of clerks who likely know very little about tax law. Tax law is not even a required course at 5 out 6 Ontario law schools so just being a lawyer or judge does not mean much when it comes to tax.

With respect to the discussion of Luprypa in the reasoning the court does not say Luprypa is irrelevant to the discussion of poker tax cases but rather that it is irrelevant to your situation. CRA was attempting to make your situation like Luprypa but they never actually provided any evidence to support the claim that you used a system. The failure to do that is why CRA loses consistently. If you think the court said that Luprypa is irrelevant for all poker cases then you are misreading the decision. Further, even if the Federal Court said that in an admin case it would have absolutely zero relevance in tax court.

I also assume you realize that having been successful in Federal Court does not preclude CRA from coming after you. Your decision was limited to the reasonableness of CRA's refusal to allow you to restate your returns -- it has no bearing on your status as a professional or recreational player. If CRA was willing to put the effort into making a Luprypa-like argument for your poker playing you would need to fight it in court. The probability of CRA being successful would largely come down to how much data they could gather on how you played and how much they would be willing to spend on experts to go through that data.

The only slightly odd thing about the reasoning is that the judge at one point seems to imply that poker is a game of luck which it is not. That can be ignored since it is a mistake of fact by a different court. If that was something that the tax court stated it would be of some interest but the tax court has actually been quite on the other side of the issue and has constantly considered poker a game of skill.

Just to be absolutely clear I don't think CRA is going to go after any poker players for quite a long time -- if ever. I don't think anyone should be paying income tax on poker winnings. The claim though that CRA can't win a poker tax case is just wrong. Assuming there is no issues in getting the data from the poker site CRA can win most cases against online poker players. It might be that the cost of doing a proper trial exceeds what they could hope to recover in unpaid taxes and that is why CRA has not done it but my guess is just CRA doesn't care. All the gambling cases I am familiar with were forced on to CRA either by the media or the gambler's own actions. CRA is not the initiator. CRA is the same organization that hasn't figured out that a guy claiming over $40,000 in rent with an income of roughly $10,000 every year for over a decade is worth auditing so they are not suddenly going to start looking for poker players. I'd say a poker player who also has a cash business are the only people who need to worry. Pure poker players will not have an issue unless they start a blog about how much money they make and it gets into the mainstream media.

Ok, so as I understand all of this, there is essentially one fundamental question to be answered in regards to taxability, and that is - "Is the player in question's gambling activities a business activity?"

And as a related question, there is - "What constitutes gambling being a business activity?"

Are there any other fundamental questions to this? Is that the jist of this? Am I way off?

Writing from my phone so expect typos, sorry in advance.

The analysis is as follows (from a variety of sources - the ITA, case law, CRA position papers - which I am not inclined to link to):

1) is the income from a "source", as opposed to a windfall (ITA s.4)

2) a source is an "office, employment (a job), business (ding ding), or property (ie land or investments)" (s.4(1))

3) Business is an ongoing activity that is in pursuit of profit or is done a reasonable expectation of profit (but not a hobby or personal "endeavour") (test for "business" is REOP from Moldowan v. R, but test is repackaged and "personal endeavours" carved out from "sources" in Stewart v. R)

4) this is where a "system" comes in. The TCC ruled that an endeavour managed and organized with pursuit of profit" in mind was a business. But they agreed that in the particular case it was still a personal endeavour and that it would possible but very rare to find a gambling operation to be a business.(Leblanc v R)

5) which brings us to Cohen, where he court affirmed the Leblanc analysis and went a set further, looking to the "generally accepted" nature of poker as a personal gambling activity, even when a guy was making a living at it.

7) the key of all of the analysis is that the determination will be done on a case-by-case issue (which is why I thought the CRA may eventually drop in a Reg regarding pro poker players, as they hate the uncertainty of "case-by-case basis.

8) the FCA in Radonjic basically said that the CRA has discretion to judge cases, but they issued an unreasonable (note: not necessarily incorrect) decision in making Radonjic's winnings taxable. Of note is that a) Long term winning doesn't necessarily mean there is a system; b) everybody tries to win at poker, so just trying to improve your game by studying doesn't mean you have a system. This implies that system isn't just having better decision-making, but a method of winning that doesn't require active continuous decision-making and/or uncertainty (ie a weighted hand range versus dead reads); c) in fact, the entire list of factors that Henry listed. But again, that list is not part of the reasoning for the decision - it's just comments on the things a reasonable decision would look at

9) So, in theory, the CRA may yet find a way to tax poker winnings, but they nor the law has set out the factors to make the determination whether a particular player's activities constitute a business.

10) Henry has some other cases I haven't read closely that may shed light so I don't want to comment on but they may be relevant.

11) so, while you are in the right hemisphere, the key point you are missing is that analysis is done systematically from the starting point, not just based on that list in Radonjic because that list is not law re taxation of poker players - it's only a musing on what might be behind a hypothetical reasonable CRA decision to tax a poker player.

EDIT Henry's analysis of Equal's decision is right and you should read it.

Gamblor - Thank you, I'll look to respond in a more formal way that involves looking at the related law and cases.

For reference, I'm working more off of TaxGuru's work than off of the Radonjic case.

Would it be necessary for the CRA to get that information on their own? Would the CRA not be able to just request that the player gives them access to his/her PT/HEM etc?

Keep in mind I am not a tax lawyer - though as a corporate lawyer my practice occasionally has to use tax considerations - that is just my understanding of the situation.

A little more research revealed this good article from 2011 that you should read, which should give you everything you need up to Equal's case (in fact, the judge in Equal's case cites this article) - and, again, you should respect the points Henry and I are making about Equal's case being an admin law decision, not a tax law decision, so the CRA can basically just fix its decision-making process and the court might support an opposite result.

https://www.ctf.ca/ctfweb/CMDownload...f-84398c7a5990

How important do you think what I bolded in 8b is? I think this is an important/crucial point, and if I'm right then I can rest certain in the legality of my tax situation.

It seems almost every player would pass this test, and not be taxable. Sure, there will be some exceptions, though in my mind that would be a lock. I would have no problem holding up in court that my playing is of no fixed strategy, and that I needed to constantly think on my feet and make up stuff as I went along.

This is TaxGuru's stuff - I know it well

As I said, in this particular area especially, you can't really look at just one thing on a list and say "aha, not a business!"

I mean, business owners make decisions all of the time, right?

It just was a happenstance interpretation of a particular phrasing they used - a "system". It's not a yes-no idea; think of it as a spectrum from "total automated decision-making" to "decisions are all flights of fancy". factors will tilt it toward one direction or another, and any court will still require a whole analysis. Like, a bot farm would look way more like a business than one guy studying and playing. They look at the whole picture.


As I said, i grunched

Its fun to debate this, and maybe I'm being paranoid here, but I think in this case its very negative EV.

From my understanding, which is largely limited to TaxGuru's work, and reading related cases, it seems that there is precedent for what can be said to not be a business. I guess that's where I'm stuck.

There seems to be a lot of existing case work that carves out specific attempts at claiming the business nature of poker playing to be faulty. It seems that you're saying that these ideas could be overruled in a future case? How difficult would it be to claim someone's poker playing is a business and win when it goes against existing cases?

In all of the speculation I've read as to what constitutes a potential business of playing poker, I have not heard an actual hypothetical solution to what this could look like.

When I read TaxGuru's work, it sounds like he believes that to be in the business of gambling requires something extreme, such as a bot farm like you mention. His work seems to indicate the belief that an individual playing poker is not a business in and of itself until/unless there is a mystical "something else" that results in an extreme risk reduction for the person playing.

And then I read Henry17's work, and it makes no sense to me. He seems to be claiming that poker is simply taxable, and that as the law is written I and anyone else playing poker are in the business of poker. Though I have a hard time accepting what he says because he seems to lack a fundamental understanding that the arguments he puts forward about what would make a poker player in the business of gambling also apply at the same time to all recreational players.

In essence, his argument that all poker is a business activity (at least, it sounds like that's what his stance is when he plainly says "poker is taxable") would result in the ability to declare seemingly illegitimate write-offs. I question his intent with such a stance.

On a personal note, Henry17 has bothered me by attacking me personally, and also before I came on here by calling everyone who pays taxes for poker a fool. This is insulting to myself, my friends, and colleagues. So I guess I was a bit upset with him already before we really started interacting.

From my understanding, it seems that the framework for determining what constitutes a business of gambling must work both ways. What I mean by that is that if reasons a, b, c are used to pin me as in the business of gambling, then it also means that anyone else who can legitimately claim reasons a, b, c would also be in the business of gambling. Though that seems at odds with the case-by-case basis of this.

I'm looking for a hypothetical solution that makes sense.

What would it look like for a person to be playing poker full time and be without a doubt taxable? And not taxable?

What are the reasons for knowing they're taxable?

What does the other side of those people look like? What I mean is, take those reasons, and then what does it look like to see the people that get to claim tax write-offs for their poker playing being a legitimate business regardless of whether or not they have an expectation of profit?

Sigh.

In my mind this makes sense, but I'm out of my depth in communicating through the language of law.

I guess my fear is that I will be in the right, but that the CRA will just decide to rule against me. It doesn't seem fair that I should even have to consider that my government may effectively keep a large amount of money that I'm entitled to, and be able to do it all on a whim.