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Old 11-22-2014, 01:11 PM   #2551
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Re: Canadian Online Poker Tax Thread

Henry, if you ever consider working for the CRA, please come to this thread before hand. I'm sure Canadian poker players collectively should get together and match your salary to keep you away from that job at that point. :P
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Old 11-28-2014, 08:16 PM   #2552
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Re: Canadian Online Poker Tax Thread

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This is where TaxGuru and I disagree. While it is true that the final decisions have concluded that CRA has not established that the player's winnings were from a taxable source the reasoning has always included direction to CRA on what they would need to be successful.

The current situation is that CRA presents an argument along the lines of establishing Player was a winning player, that Player took engaged in activity to increase his chance of success, and lastly that Player made decisions such as quitting his job / not working that indicated he has an expectation of winning.

The courts correctly point out that all players engage in activity to increase chance of success and that someone who is delusional about their future success would behave the same as someone who actually is a professional player. This leaves CRA with an argument that winning = professional and the courts won't accept that.

I thinking if CRA presented a statistics based argument about winning over a long enough period they might have a chance of being successful but they have never done this and I don't think it would have more than a ~20% chance of being successful.

What CRA has to do to be successful is make a case based on the behaviour of Player while the person is actually engaged in the process of playing poker. So this is the kind of evidence CRA would need to present:

1) Hand analysis -- basically hire an expert to analyze the way Player plays hands and establish that there is a difference between the game play of Player and other players.
How could they establish someone as an expert? That seems more difficult than proving someone's taxable in the first place.

Record of winning? Doesn't indicate expert. I don't think this point is up for debate.

Well known as a "pro"? Doesn't indicate expert. I would have a hard time believing that Eli Elezra is an expert, though tv coverage has painted him well as one.

Accepted in the community as a good player? Doesn't indicate expert. There has been fraud like this in the past.

I don't think that whether or not someone is a "poker expert" can be known and proven in court. There is no formal method to establish this, and in general, poker players fight against this idea on a fundamental level.

Anything they do to claim someone is an expert could be done to claim someone else is an expert on the counter side and refute any evidence of the potential taxpayer fitting your mould.

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2) Table selection analysis -- easier to do that #1 but here CRA would need to hire an expert to look at how Player chooses his tables and seat. How often does Player change seat and are those seat change requests based on a specific pattern of trying to position oneself in a certain order relative to a bad player? Does the player use specific criteria when selecting tables to play at? How strict is he about this criteria?
Again, like just about everything else that can be argued, table selection doesn't make someone a pro. Short stacking doesn't make someone a pro. I'm not one, but have spoken with many short stackers who have been successful, and it would be ridiculous to say that attempting to employ a short stacking strategy with the best possible table selection makes someone taxable.

I would expect that most short stackers do not show profit, no matter how much they may look like a "poker expert" or "professional" to the untrained eye.

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I'm not a big poker player but the people who are could make a better list. Basically what CRA has to do to be successful is use statistical analysis to establish the stuff professional poker players do while playing that is different from what non-professionals do. From what I understand of short-stacking strategy this would be a fairly simple thing to do if CRA went after a professional short-stacker but for someone who plays normally it would be much harder.
Really? And how would anyone go about determining what players fit into the "professional" player category, and which ones don't?

There's too much incentive for people to misrepresent themselves with regards to being a pro when they're not, or not being a pro when they are.

Whatever criteria you may want to use to make these determinations will be faulty.

As soon as you can write down and logically explain to someone what makes a certain player a profitable professional, you've undermined it.

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I personally don't think CRA is ever going to bother with this given the issue of getting the data and more importantly the high costs associated with getting an expert. When you factor in the uncertainty this would only be worth it for the most successful players. At those levels there is a lot a player could do to reduce tax or the simplest eliminate it completely by moving to a jurisdiction that doesn't tax gambling. Because the process needs to be done for each individual CRA wants to pursue I can't see how this would ever be worth it for CRA except maybe for people like short-stackers who have a very clear and simple algorithm based play.
I hope you're right. I'd appreciate getting my money back without a fight, though I'll rip 'em a new one should it come to that.

There also seems something fundamentally flawed in the idea that as an individual, I cannot know whether or not I'm taxable, and that the law is so unclear about this that I need an official ruling from the CRA to determine my taxability.

How is it in the interest of fairness to have a taxation system setup that someone who is trying to follow is fundamentally unable to. Which is really what's being said when we talk about each case being decided individually.

I thought the law was supposed to be not up for interpretation. I would attack that really hard if I ever go to court for this. I don't really care if it seems relevant or not, this is ridiculous.
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Old 11-28-2014, 09:22 PM   #2553
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Re: Canadian Online Poker Tax Thread

The answer to most of your questions requires more detailed of an answer than I feel like providing at the moment but I assure you it can be done easily as long as hand histories are available.

I quick answer is that part of the flaw in your reasoning is that you make the mistake that first we need to establish ideal play and then show that an individual played that method. That is incorrect. All you need to do is establish that they used a method -- that method does not need to be ideal or even agreed to by other poker players.

With respect to the fairness of the ambiguity -- tax policy is not created with consideration for every possibility. Gambling as a profession was not something that needed to be addressed nor does it really need addressing now. The hobby / business dichotomy was more concerned with people having hobbies that lose money or fake businesses. An activity that realistically involves a few hundred individuals the majority of whom make under $100k is not a high priority.
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Old 11-28-2014, 09:36 PM   #2554
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Re: Canadian Online Poker Tax Thread

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The answer to most of your questions requires more detailed of an answer than I feel like providing at the moment but I assure you it can be done easily as long as hand histories are available.
You have no claim to trust here, I take nothing you say on it's face as you request. If you say it can easily be done, then say how.

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I quick answer is that part of the flaw in your reasoning is that you make the mistake that first we need to establish ideal play and then show that an individual played that method. That is incorrect. All you need to do is establish that they used a method -- that method does not need to be ideal or even agreed to by other poker players.
Used a method? You mean like the ones recreational players use? Or is this some special method that only pros know?

What exactly is the difference between a method used by a recreational player and a taxable player?

Are there methods that aren't good enough to be used successfully? Like, I could count cards in black jack, and play perfectly by the numbers... that's a method. Can I claim all of my losses at the tables now? By this reasoning, I'm taxable for using a method, which means it goes both ways, right?

If your argument doesn't separate a recreational player from your ideal group of taxable players, then it is invalid. Or worse, it allows for many illegitimate claims of tax relief by recreational players.

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With respect to the fairness of the ambiguity -- tax policy is not created with consideration for every possibility. Gambling as a profession was not something that needed to be addressed nor does it really need addressing now. The hobby / business dichotomy was more concerned with people having hobbies that lose money or fake businesses. An activity that realistically involves a few hundred individuals the majority of whom make under $100k is not a high priority.
Irrelevant. Ambiguity of the law cannot be against someone trying to go by it.

It is not a valid argument to say "well, we didn't account for that in our law. lemme just make something up. I'll sit on your cash 'till I figure it out, and you might not like it."
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Old 11-28-2014, 10:18 PM   #2555
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Re: Canadian Online Poker Tax Thread

bright_sensor,

Sorry I think you misunderstood. My role here is not to answer the rantings of angry ******s
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Old 11-28-2014, 10:24 PM   #2556
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Re: Canadian Online Poker Tax Thread

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bright_sensor,

Sorry I think you misunderstood. My role here is not to answer the rantings of angry ******s
Your arguments don't hold water, and you don't seem to be on the side of poker players. It bothers me that no one else is calling you out, so I'm doing it.

What is your role exactly? I can't see you as an impartial third party hoping for the best for poker players posting here. Are you working for the CRA in some way?

I mean, I post legitimately good counter arguments to what you say, and all you got is to call me an angry ******? If your thoughts represent the best the CRA can hope for, then the poker players have this one in the bag.
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Old 11-28-2014, 10:43 PM   #2557
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Re: Canadian Online Poker Tax Thread

Henry:

You hit on the #1 Dismissive Argument That You Only Use When You're Wrong as told by cracked. Care to spew the rest?

Maybe step down from the microphone for a bit?
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Old 11-28-2014, 11:42 PM   #2558
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Re: Canadian Online Poker Tax Thread

The law is open for interpretation, but the key for me is the phrase "reasonable expectation to profit" which means you should be able to work out expected profit mathematically, not merely rely on past results. Like you can easily work out how much profit the house should make at their table games for instance. Whether they actually realize the profit is beside the point, the expectation was there.

My brother in law used to be an auditor for CRA and he didn't know for sure about taxation on poker. He asked others in the office and they didn't know either. And they didn't seem to care that much about it. It would come down to luck of the draw, if you happened to run into a hard ass "company man" like henry he would tell you pay up or else. Then from there if you decided to fight it in court it would again depend on the type of judge you get, I used to think it was a 50/50 thing but now with the radjonic case its probably more like 90% in favor of the player.

So you would have to run pretty bad to get audited by a hard ass that insists winnings are taxable and get a bad judge.

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Old 11-28-2014, 11:53 PM   #2559
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Re: Canadian Online Poker Tax Thread

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The law is open for interpretation, but the key for me is the phrase "reasonable expectation to profit" which means you should be able to work out expected profit mathematically, not merely rely on past results.
That phrase isn't actually a part of the law though, is it? If it is, I'd be curious where it is so that I can understand the context a bit better...

My memory of related case law says that "reasonable expectation of profit" hasn't held up as a valid reason for taxation, or that it's something that is as straightforward as it may appear.

Last edited by bright_sensor; 11-28-2014 at 11:59 PM.
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Old 11-29-2014, 12:04 AM   #2560
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Re: Canadian Online Poker Tax Thread

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if you happened to run into a hard ass like henry he would tell you pay up or else.
My position is that poker is taxable but also that the nobody should voluntarily pay income tax. The question about tax is a legal one and the courts have made it very clear what CRA needs to do to be successful. If CRA chooses to proceed properly they will be successful. I also don't believe they will so despite the legal answer the pragmatic answer is to not pay. I would never advise a poker player to voluntarily pay income tax. I thought that was very clear. No offence to your brother-in-law but my position has always been that CRA is too lazy and incompetent to ever succeed on this issue.
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Old 11-29-2014, 12:11 AM   #2561
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Re: Canadian Online Poker Tax Thread

The courts have not made it clear what the CRA has to do to be successful. If anyone has given suggestion of what the CRA could try, it doesn't mean that suggestion would actually play out in a way that shows a poker player is taxable in anything but a very extreme and unusual case.
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Old 11-29-2014, 12:15 AM   #2562
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Re: Canadian Online Poker Tax Thread

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The courts have not made it clear what the CRA has to do to be successful. If anyone has given suggestion of what the CRA could try, it doesn't mean that suggestion would actually play out in a way that shows a poker player is taxable in anything but a very extreme and unusual case.
How many of the court decisions have you read?

How many courses in tax law have you successfully competed?
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Old 11-29-2014, 12:46 AM   #2563
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Re: Canadian Online Poker Tax Thread

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How many of the court decisions have you read?

How many courses in tax law have you successfully competed?
Sorry bro. Tough to let go of beliefs you hold onto tight. 'Sall good tho.

If my opinion here doesn't matter without sufficiency in both of those, then wouldn't that mean not taking poker classes means I'm not able to know what I'm doing there either?

Last edited by bright_sensor; 11-29-2014 at 12:51 AM.
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Old 11-29-2014, 01:35 AM   #2564
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Re: Canadian Online Poker Tax Thread

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That phrase isn't actually a part of the law though, is it? If it is, I'd be curious where it is so that I can understand the context a bit better...

My memory of related case law says that "reasonable expectation of profit" hasn't held up as a valid reason for taxation, or that it's something that is as straightforward as it may appear.
Totally grunching here:

This is sort of correct; while REOP was the initial basic test under the ITA (actually CRA regs), the TCC has carved out so many limitations in it that it's hardly operational except in all but the most straightforward situations.

Gambling - incl. Poker, is viewed as a personal endeavour (not a business), even where there is a REOP, so it is non-taxable. Radonjic was an FCA case not a TCC case, so the issue there was one of CRA reasonableness, not correctness, so we don't know what the correct answer is from that. But some of the court's peripheral statements suggested they would not find it taxable without some very difficult-to-obtain evidence, as the key operator is still whether it was a personal endeavour. If (spitballing here) the CRA somehow showed that a player maybe was "selling" his time to his opponents (a long stretch) then maybe. So effectively no.

See the Stewart, Leblanc, Cohen, and Tarascio cases for the actual law.

My humble opinion is that if the poker "boom" continues much longer (inasmuch as it is still a "boom") we'll see some legislative changes.

Last edited by Gamblor; 11-29-2014 at 01:49 AM.
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Old 11-29-2014, 01:38 AM   #2565
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Re: Canadian Online Poker Tax Thread

You should chill out bright sensor. you're not sounding so bright. Henry has been helpful in this thread and it is a thread for anyone to voice there opinions. It is up to you whether you accept there reasoning or not. If you feel so secure in your stance then there is no need to try to be in his face.

You sound very immature imo.
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Old 11-29-2014, 06:50 AM   #2566
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Re: Canadian Online Poker Tax Thread

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That phrase isn't actually a part of the law though, is it? If it is, I'd be curious where it is so that I can understand the context a bit better...

My memory of related case law says that "reasonable expectation of profit" hasn't held up as a valid reason for taxation, or that it's something that is as straightforward as it may appear.
I'm pretty sure its there. Ironically, it was put there by them to protect themselves from people trying to claim losses from business ventures other than gambling.
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Old 11-29-2014, 06:56 AM   #2567
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Re: Canadian Online Poker Tax Thread

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No offence to your brother-in-law but my position has always been that CRA is too lazy and incompetent to ever succeed on this issue.
He didn't stay there long. He got a lot of job offers and is now doing something higher up with the government. Which speaks to your theory that if you have a lot of tenure as an auditor with the CRA then you probably aren't the brightest crayon in the box...
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Old 11-29-2014, 10:05 AM   #2568
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Re: Canadian Online Poker Tax Thread

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I'm pretty sure its there. Ironically, it was put there by them to protect themselves from people trying to claim losses from business ventures other than gambling.
REOP is not in the Incone Tax Act. The phrase is based on an argument made by the CRA in Moldowan (and accepted in the judgement) as part of the definition of "business". See the list of cases I posted above, in particular the Stewart and Cohen cases.
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Old 11-29-2014, 10:07 AM   #2569
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Re: Canadian Online Poker Tax Thread

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See the Stewart, Leblanc, Cohen, and Tarascio cases for the actual law.
Epel, Luprypa, and Balanko should also be on the list.

Quote:
My humble opinion is that if the poker "boom" continues much longer (inasmuch as it is still a "boom") we'll see some legislative changes.
I can't see that. The number of people involved and the amount of money involved is too insignificant.

Radonjic is an admin case not a tax case so mostly useless but the ruling is significant because it includes a clear statement of the critical issue in all the cases and why CRA has lost every poker case.

Quote:
The Minister concludes that the Applicant had a “system” but does not provide any meaningful explanation of what this system might be.
That is it in a nutshell. CRA in every poker case has tried to argue that the player had a system by arguing that that the player's behaviour indicated the existence of a system -- consistent winning, quitting employment, taking on future financial responsibilities with the confidence that poker winnings would enable him to meet those responsibilities. I actually think this is a valid argument so long as the length of the endeavour is sufficiently long but the courts don't so for our purposes it isn't. That does not mean that poker is not taxable -- it means if CRA wants to be successful they must establish in court that the player used a system by showing the court what the system was.

To see what that would look like we should look at a successful gambling case Luprypa where the gambling activity was playing pool. The reason CRA was successful here is that they established the following

Quote:
a) He carefully managed the risks.

b) He was a skilled player.

c) He played Monday through to Friday each week.

d) He spent his afternoons playing snooker to perfect his skills.

e) He played inebriated opponents after 11:00 p.m. to minimize his risk.

f) He won most of the time earning, approximately $200.00 daily.

g) He drank alcoholic beverages only on weekends when not playing pool to give him a sober advantage over his inebriated opponents.

h) He was calculating and disciplined.

i) It was his primary source of income and he relied on this steady income.
All of these have poker equivalents and creates a pretty good map of what CRA would need to do to be successful. Likely because CRA doesn't understand poker or maybe the costs are just too high to justify the investigation and expert witnesses needed to do a poker case properly. There is absolutely no doubt that given a player's unaltered computer and their hand history it would be possible to meet the requirements the court has set out.

The Leblanc case is interesting because it doesn't involve poker but two idiots who played the sports lottery. In this particular instance CRA did proceed correctly and they should have been successful except they allowed Leblanc to introduce an expert witness who testified that it is mathematically impossible to gain a sufficient edge by handicapping to be successful when the betting requires a minimum three game parlay. While the Leblanc expert is correct when dealing with live odds at that time the OLG used to publish static odds a week in advance. The Leblanc system of wagering involved looking for games where something significant changed and then taking advantage of the fact that Proline's odds were static and did not reflect the new reality. That made the testimony of Leblanc's expert witness incorrect but CRA never introduced their own expert witness to counter it. My guess is that it wasn't cost but that CRA did not understand the significance of static lines on sports betting. The OLG being in the business of gambling certainly understood and because of the Leblanc system they changed ProLine so that lines were only published a day in advance. That change put the Leblanc brothers out of the sports betting business.

My position has never been that poker players should pay income tax -- quite the opposite for years I've said you're a fool if you do. My point is only that saying poker is not taxable is incorrect. CRA has lost every case out of their own incompetence. CRA could have been successful in most of these cases had they had someone who understood gambling sufficiently to suggest getting proper expert witnesses.
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Old 11-29-2014, 11:36 AM   #2570
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Re: Canadian Online Poker Tax Thread

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Quote:
The Minister concludes that the Applicant had a “system” but does not provide any meaningful explanation of what this system might be.
That is it in a nutshell. CRA in every poker case has tried to argue that the player had a system by arguing that that the player's behaviour indicated the existence of a system -- consistent winning, quitting employment, taking on future financial responsibilities with the confidence that poker winnings would enable him to meet those responsibilities. I actually think this is a valid argument so long as the length of the endeavour is sufficiently long but the courts don't so for our purposes it isn't. That does not mean that poker is not taxable -- it means if CRA wants to be successful they must establish in court that the player used a system by showing the court what the system was.
Though there may be exception, I've seen no successful poker player that uses a "system".

If someone were to write a bot, that would clearly be a system, and that would seem to indicate the business side of playing poker. However, the theory behind poker bots is either "simple" and not a viable winning strategy, or exceptionally complex to the point of the "system" not being implementable by a human.

Poker players do use good ideas over and over when they play. Though much of their decisions are necessarily going to be making it up as they go along in the moment.

You've mentioned short stacking strategy in the past, and you would be right to assume that it's much more systematic than full stack poker. There are systems being sold that employ these strategies. From my understanding, most players using these "systems" never show profit.

And so, I have a hard time understanding how the use of a system would be used to declare taxability when it seems the majority of those using reasonably good systems are unlikely to be able to break the "reasonable expectation of profit" barrier.

On the surface, the idea of "oh, poker players have a system, and that means they're taxable" looks reasonable. However, I don't think this could be used in any meaningful way to separate those with earning potential from those without.
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Old 11-29-2014, 11:44 AM   #2571
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Re: Canadian Online Poker Tax Thread

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Quote:
a) He carefully managed the risks.

b) He was a skilled player.

c) He played Monday through to Friday each week.

d) He spent his afternoons playing snooker to perfect his skills.

e) He played inebriated opponents after 11:00 p.m. to minimize his risk.

f) He won most of the time earning, approximately $200.00 daily.

g) He drank alcoholic beverages only on weekends when not playing pool to give him a sober advantage over his inebriated opponents.

h) He was calculating and disciplined.

i) It was his primary source of income and he relied on this steady income.
All of these have poker equivalents and creates a pretty good map of what CRA would need to do to be successful. Likely because CRA doesn't understand poker or maybe the costs are just too high to justify the investigation and expert witnesses needed to do a poker case properly. There is absolutely no doubt that given a player's unaltered computer and their hand history it would be possible to meet the requirements the court has set out.

The Leblanc case is interesting because it doesn't involve poker but two idiots who played the sports lottery. In this particular instance CRA did proceed correctly and they should have been successful except they allowed Leblanc to introduce an expert witness who testified that it is mathematically impossible to gain a sufficient edge by handicapping to be successful when the betting requires a minimum three game parlay. While the Leblanc expert is correct when dealing with live odds at that time the OLG used to publish static odds a week in advance. The Leblanc system of wagering involved looking for games where something significant changed and then taking advantage of the fact that Proline's odds were static and did not reflect the new reality. That made the testimony of Leblanc's expert witness incorrect but CRA never introduced their own expert witness to counter it. My guess is that it wasn't cost but that CRA did not understand the significance of static lines on sports betting. The OLG being in the business of gambling certainly understood and because of the Leblanc system they changed ProLine so that lines were only published a day in advance. That change put the Leblanc brothers out of the sports betting business.

My position has never been that poker players should pay income tax -- quite the opposite for years I've said you're a fool if you do. My point is only that saying poker is not taxable is incorrect. CRA has lost every case out of their own incompetence. CRA could have been successful in most of these cases had they had someone who understood gambling sufficiently to suggest getting proper expert witnesses.
Again, on the surface I can see how this would look to be something that could be used against poker players, but it seems that their actual use would be very limited to players that take exceptional measures to remove risk in their day to day game playing. I expect that this is in no way typical of poker players that have won enough to be concerned with taxability.

a, b, c, d, h, i - I believe that all of these either make no distinction between a recreational player and one that would potentially be taxable, or has been shown in court to be invalid.

e, g - This shows that it was not the pool playing for money that created the taxability, but rather the attempt at a total negation of the risks involved by playing against inebriated opponents.

f - The consistency mentioned in this case is very rare in poker, though it does exist.

Last edited by bright_sensor; 11-29-2014 at 12:03 PM.
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Old 11-29-2014, 11:47 AM   #2572
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Re: Canadian Online Poker Tax Thread

bright_sensor,

Nobody cares what you think. You're an idiot. Gamblor is qualified to have this conversation -- you are not.
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Old 11-29-2014, 11:56 AM   #2573
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Re: Canadian Online Poker Tax Thread

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bright_sensor,

Nobody cares what you think. You're an idiot. Gamblor is qualified to have this conversation -- you are not.
I'm sorry for having come across harshly towards you. I make some very good points though.
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Old 11-29-2014, 12:44 PM   #2574
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Re: Canadian Online Poker Tax Thread

It sounds good in theory Henry but i think you not being a poker player in today's world gives you the wrong idea of what having an expert and hhs would do for you. Especially at the high stakes online, everybody plays using a system and you can't look at specific plays to say this is how a professional would play this hand or this is a fishy play. Most action with most hands are taken at some frequency in optimal play. What seperates the pros is not what actions they take with what hands it's their frequencies as well as emotional stability.

Most regs spend a lot of their time playing other regs. Should those games be taxable? It's pretty hard even for a poker pro too see the rationale in that argument.

Anyways it'll all be moot when the olg comes out with a rake free site with built in taxation.
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Old 11-29-2014, 01:31 PM   #2575
ShaunHunting
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Join Date: May 2008
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Posts: 446
Re: Canadian Online Poker Tax Thread

Quote:
Originally Posted by Henry17 View Post
bright_sensor,

Nobody cares what you think. You're an idiot. Gamblor is qualified to have this conversation -- you are not.
Henry, I've followed this thread for a long time, and I appreciate your contributions. I enjoy reading your posts and I respect your knowledge and your opinions. You've helped carry this thread and make it a great resource for all Canadian players.

That said, you are out of line here. This is your second post where you've been rude to Bright Sensor. I feel he is bringing up some good points and I'm intrigued by his arguments. This is a forum for open discussion and debate. All points of view should be welcomed.
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