The Proline case only shows:
1. The courts are reluctant to start saying traditionally untaxed areas like gaming wins are taxable - that means the CRA will only win or even try if the case is quite clear cut.
2. The level of organization is not a real factor at all.
3. The minimization of risk through deiberate strategies is a big factor. Thus tourney pros may be safer than cash game players.

So now poker players have some idea of the weighting of some of the factors that determine whether you are considered in the business of poker.

This leads me to something I've been thinking about as well. Lets say that someone is a NL cash game player and they are paying their taxes on that. Now for fun they decide to enter some tourneys where they don't have an edge (because its not their main game) and get lucky and win one... Are they required to pay taxes on that? Or would that be seperate? Or another example they decide to play Omaha or Razz or something they don't regularly play.

Basically is all of poker lumped into one category???

No - certain games or types or ev en certain times periods can be treated differently.

It is how that particular event fits the the critieria that is important.

You can easily be a pro cash ame uy and dablle in tourneys without it being part of your business/ Even the odd HL HORSE session may not be part of your business if thats not what you normally do or have the same expectation at.

Could you take that one step farther and say my main game is 2/4 and ive played 100k winning hands of it this year but I dabbled just a bit in 5/10 lets say 5000 hands and got lucky and won a lot but obviously I have less or maybe even no edge in a 5/10 game. Pay tax on 2/4 and skip on higher stakes? Just a thought....

^^^
v dubious (in my uninformed opinion).
Then again, there's no playbook for any of this re: what is and is not OK. It's all how it would be interpreted by a court.

I was thinking this as well. Or even if you are a 5/10 regular, but from time to time end up at tough tables in what are -EV for you.

Also, lets say you take a shot and lose ~ 25 - 50 % of your role in a short period. Even if you built your role grinding throughout the year, would you be able to argue that it is a game of chance do to (perceived) high risk of ruin?

Thanks to TorontoCFE for posting the link to the pronline case.

A quick (maybe not so quick) question though:


if an individual whose citizenship is canadian generates 'gambling winnings' in a country that has even more 'generous' definitions of what constitutes income, do they use the domestic or foreign definition for income when considering what you need to pay to the canadian government?


and one other consideration if you know off hand - is there any precedence set for how liberally these rules are applied to individuals collecting a full pension?

To be treated differently for taxes, the game would have to be materially different - going from 3/6 to 5/10 won't be different but going from HE to razz might or cash to tourney would too.

If a Canadian generates income in another country, then (absent a tax treaty), they pay the appropriate tax to the foriegn country and deduct that amount from the Canadian tax they owe on it (up to the amount that would have been paid in tax on it in Canada).
Thus, something not taxable in the other country but is in Canada will result in Canadian tax on it at the normal rate.
Something taxable in the other country and not Canada means paying the foreign tax with no deduction in Canada for it.

Pension income is always covered by a tax treaty if there is one and I think is usually taxed in the country you live in (not sure on that though)

CFE:

Was the ProLine case a criminal prosecution for tax evasion? Or was it more of a 'declaratory judgment' type of action filed by the brothers to determine whether or not they owed the tax?

If it was criminal (which i suspect), what type of punishment were they looking at? Are there established sentencing guidelines in Canada for tax evasion? What are they, and are they dependent on the absolute amount of taxes 'evaded', or on the nature/egregiousness of the evasion, other factors, or what?

THe Proline case was not criminal , just to establish that they owed tax.

There have not been any criminal proseutions - the government would never win since it is hard to prove evasion of a tax that hasn't been definitely established to be owed. Hard to say you tried to avoid paying a tax that you could legitimately say you didn't think you owed.

That said, 1st offences for tax evasion are usually a fine of the amount of the tax plus the amount of the tax owed (i.e. double the tax ) plus some sort of probation.
You would not go to jail without a prior record in any case unless it was blatant and extreme. the punishment in Canada is basially a lot less than the US is likely to be.
The sentence would be based not on the amount so much but your actions the actions you took to avoid the tax (like structuring transations or fabricating douments) and your past.

damn that's some good info right there. Thanks again TorontoCFE, I'd wish I'd known about this earlier.

Hi TorontoCFE,

Thanks again for providing us with all of your insights. Did you get my PM asking about a consultation with you? Please let me know if that would be possible in a PM, and if so, how I could contact you.

thanks again.

as for the pension issue, i was more curious about how it would be regarded with respect to a 'primary income', and how much can be reasonably held as gambling gains before it trumps the pension cheques for status as ones primary income.

TorontoCFE and Henry, thank you both for all your help.

I have a couple of other questions:

1) Henry, you once said that you had a friend who has not filed his taxes for a few years and then suddenly receive notice from the CRA that he has to file. Yet, you know of many others who had not filed but were not bothered by the CRA. Is it by the luck of the draw that the CRA forces certain avoiders to file? How do to they choose? Ideally, anyone who doesn't file should be forced to file, correct?

2) Do Canadian banks have an obligation to report large deposits to the CRA? How large? What about regular 5k-10k weekly deposits?

Cheers

Filing a tax return is only mandatory if you owe the government money or if they request you do so. They will request you do so if they suspect you may owe money (or if you have RRSPs etc and they want an update on your remaining room ) and they will think that if they have some record of income belonging to you, usually from a T4 or a transaction report from a financial insitution.

Whether you get a rquest to file depends on whether they are getting info on you from other sources (T4s, etc.) and wthter you have a history of filing. If you send in a return every year for 10 years and then stop, you will likely get a request to file. If you have never filed or never made enough to pay much tax , then it is less likely they will notice or care.

Banks are obligated to report transactions to FINTRAC if they do not know the source of the funds or if the transactions do not fit your past profile.
Generally the amount would be over 10k in 1 or a series of transactions but they can report any amount if they do not know where you are getting the money. Frequent large deposits of cash will get reported. FINTRAC uses the info more for preventing money laundering and anti-terrorist funding but the info can be used for tax evasion cases I believe.

Pensions have no bearing on any other type of income and there is no use of a "primary income" in tax law. In looking at whether you are in the business of poker, the merits of your poker situation only are looked at. Poker can be a business if you spend a little bit of time on it just as easily as if you spend2,500 hours on it. That said, being retired could let you say you play poker to pass time as a hobby and you have no need to live off the income.

Never noticed thi thread till now. I will pipe in my two cents worth.

This is such a grey area and Revenue Canada has pushed about 10 cases hard. Won 1/2 and lost 1/2 Big one was guys who did Sport Select full time and won big. They are the reason there were limits put down as to how much you could gamble at one location of sports select. These guys were raking in millions. Revenue Canada went after them and lost. The cases they seem to be winning are organized crime were there is sports betting and bookies.

I used to Bomus Hunt huge and was part of the secret bonus hunting group fatbonus and the new one that broke apart. For three years I was making more bonus hunting than my regular job. I spoke directly to revenue canada and an accountant and both said I did not have to pay tax. At one point I was looking at going fulltime and my accountant advised me not to pay taxes. Keep my deposits under $5000 and utulize my neteller instabank card alot( I realize this is not possible now) He laso suggested I take 20% of my winnings and set aside in investments. His reasoning was if they ever did come after you than you have some back up. Though the main argument in all cases is if you dont tax the guy that makes 10 million winning the lottoery how can you tax someone making $100,000 at poker.

Remember this though CDN Tax Law is different than stnadrad Law. Guilty till proven innocent.

Bottom line is if you have a regular job and play your safe. If you play full time you are in a grey area. I have never paid tax and my banker knew were the cash was coming from and many deposits over $5000 but never any problems.

I miss those bonus hunting days

You may be safe if you follow this advice but i is not necessairly following the law.

Being advised to make smaller, untraceable deposits is just a means of hiding. Why hide if there is nothing to fear?

Again, the whole point of the thread is that poker winnings are not the same as winning the lottery in some cases.
Poker can become a business for some and is taxable as any other business would be for those few - according to the actual law and the spirit of the law. Just because the CRA has so far chosen to ignore it for now doesnt mean it always will.

The CRA hasn't gone after poker yet and it is different than sports betting (at least Profile type lotteries). One day some poker player may get a shock by relying on the false assumption that lottery winnings aren't taxable and thus all gaming winnings aren't as well.

I understand that there is a lot of grey area since no precedence has been set.

But when it comes down to it i suppose the most appropriate question is: what would you do?

if you had no outside source of income, would you report in full? partial? not at all?
if you had a career where the income exceeded your winnings, would you report in full? partial? not at all? how about if your winnings exceeded your income?


assuming it was in a manner that you viewed as being sustainable (ie: cash games or sit n goes with significant sample sizes)

I would declare it only if I had no other source of income and it was over 100k for the year. If you are in that situation , you are more likely to get noticed (especially if you used to have ajob and file returns) and have less case for it being a hobby.
I would incorporate if I was consistantly over 100k and pay myself a salary sufficient to max an RRSP. The balance of the profits I would loan from the corporation to myself at current market rates.
I would lease a car in the corporation name and use it to travel to play.
I'd take advantage of every deduction I could.

If you do this, then you could keep your tax bill to 20k at most and
fulfill all legal obligations.

TorontoCFE: Please see my last point re: incorporation.
I strongly believe it's a terrible idea, as it's illegal. It's not just a tax issue anymore once you incorporate, it's an issue of criminal law. The corporation is a seperate legal entity, and it is a criminal offence to place bets on behalf of another, even if you are their employee.
Also, the corporation and all info about it becomes a matter of public record, and a poker site could use that as justification to withhold winnings(since you're breaching the site's T&C regarding personal use).

I believe the risk of criminal prosecution to be negligble, much less than tax implications.

There haven't been any attempts to file criminal charges even though least 10 people that I personally know of are set up as corporations and there have been multiple attempts at getting people to file taxes.

Since some internet related cases have held that the locations where the transaction takes place is where the servers are physically located, you
could claim (assuming you were an internet player) that no bets took place in Canada.

You need not use a Canadian corpoartion. Depending on how it is set up, very little has to be available to the public. No one other than a government will ever know you are an employee of the corporation.

Nothing in the set up is against the spirit of the law.

I'm trying to get a credit card limit increase with my bank, but they're telling me that because I'm a student with no official income the $2k I have is already a stretch. I wanted to get a second card in USD, but they made me secure it. Very annoying having 2k tied up in a crappy GIC.

So anyways, if I use their online limit increase form it asks for your income. If I put down the amount I made from poker can that come back and bite me in the ass? Thanks.

Yeah thats the pain about poker. You will not qulaify for credit. Its a secured card I would not declare the income on the form. One suggestion is have a family member get a card and have a second issued to you in your name. You just pay the bill.

TorontoCFE: I'd agree with you based on how little criminal prosecution has been done in the past, but for all I know, there may have been a lot of charges for illegal online gambling laid and then settled.
The main issue is that of evidence, not criminality. As you know, it's hard for the CRA to prove that someone is in the business of gambling. However, if you incorporate, then you are giving the CRA a tight bundle of evidence which proves beyonda doubt that you are placing bets on behalf of someone else(the corporation), and thus committing a crime. While the CRA doesn't care, and it's unlikely that you will be prosecuted, why choose an illegal vehicle and give the government evidence of that.

Although that's just my opinion, a lawyer is who you want to consult.

Quick question. i am not very familiar with any tax issues... but if you incorporated, would you be able to use 'rake' from online poker site as a deductible. or is there anyway that RAKE could be used to your advantage, since so much rake gets paid into the sites.