Quote:
Originally Posted by Gzesh
Is there any source or cite for the position that under US law a poker backer, who never touches a card or makes a bet/wager, is to be deemed a "gambler".
While such a position makes some sense if someone is betting, perhaps with a Nevada sportsbook, on whether player X will win a tournament, it seems the provision of a stake is not really gambling on the outcome as much as investing in human capital.
The player who is staked is engaged in playing poker, sure.
I have read Brad Polizzano's analysis of the tax implications of staking,
https://pokerfuse.com/features/in-de...king-activity/ , but my question is whether such analysis assumes away the issue.
However, the backer is either a lender or investor in the player; do lenders/investors in a casino receive gambling income if the casino has a net win ? (A distinction should be drawn as to poker tournament fees earned by an event provider, the analogy to be drawn is to casino win/loss which is outcome determined by gambling activity.)
I believe the issue of how to treat staking/poker generally did arise in the context of whether poker is a skill game, maybe in California, but do not recall if it was in the context of a tax dispute ....
Does Russ Fox, or Brad Polizzano have something to educate me on this ? (or anyone else have a tax dispute authority on this point ? (If I dig one up I will post it.)
In tax, there is a rule that applies to this situation: You can
never change the type of income by moving it, running it through a business entity, etc. There are numerous court cases where individuals have attempted to do this; all have failed.
Certain types of income are treated differently in the Tax Code. One such type of income is "wagering income" (what we think of as gambling income). You cannot change wagering (gambling) income by moving it, running it through a business entity, etc. If it begins as gambling income, it will
always remain as gambling income.
Let's say you play a poker tournament and cash in that tournament. That is gambling income. If you are backed in that tournament, your staker's share of your income is also gambling income. It doesn't matter whether he actually did the gambling or not; under the Tax Code it remains gambling income. Similarly, if you don't cash your staker's losses are gambling losses. (This, rather than gambling income, is far more important to the IRS. Section 165(d) of the Tax Code limits gambling losses to the amount of gambling wins and applies to both amateur and professional gamblers.)
The skill game issue is irrelevant for taxes. Wagering (gambling) occurs when there is a prize, chance, and a consideration. For chance, this has been defined by the courts as any element of chance. Poker is considered gambling for tax purposes. (There are a few Tax Court cases on this. See, for example,
Tschetschot v Commissioner, T.C. Memo 2007-38.)
So is the backer a gambler? I don't know, but I do know that if he earns any income from his backing he has gambling income and if he has any losses he has gambling losses.
-- Russ Fox