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Old 08-10-2013, 04:21 AM   #2251
Zobags
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Re: Canadian Online Poker Tax Thread

Quote:
Originally Posted by emitnulB View Post
Not sure if something like this has been asked in this thread previously, but I have dual citizenship with the US and Canada. I'm planning to live in Canada starting in the near future and poker is likely to be my only source of income.

Obviously I'd love to pay 0 taxes, but I believe there's a law for Americans that states they are taxed on income made abroad. My income will be taxed under American law, and at presumably at a lower rate than it will be under Canadian law. Is it reasonable for me to claim 0 income when filing Canadian taxes while claiming income when filing American taxes? Is it reasonable to claim 0 income on both filings due to me misunderstanding the tax laws? Who do I pay taxes to if I make a trip to Vegas and win money playing a live game or if I spend an extended period of time playing on both sides of the border during a year?

This year, for instance, I'll likely spend 9 months residing in the US and 3 months residing in Canada. Assuming I'm on the hook for the tax liability of my earnings, would I essentially divide my income into 2 subsets where I pay tax to only the American government for money won in the US, and I pay tax to the Canadian government when I win money in Canada, deducting those taxes from the tax owed to the Americans for those winnings?

I am really just looking for a broad overview right now so that I can understand what kind of records I need to keep if I decide to go the safe route and pay taxes to everyone who tries to take them from me.
If you spend less than ~180 days in Canada, you should pay all your taxes to the US and none in Canada.
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Old 08-10-2013, 06:10 AM   #2252
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Re: Canadian Online Poker Tax Thread

It is more complicated than that.
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Old 08-10-2013, 06:26 AM   #2253
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Re: Canadian Online Poker Tax Thread

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Originally Posted by TaxGuru View Post
It is more complicated than that.
Care to elaborate. Are you saying any American who spends anytime in Canada owes taxes to the CRA for poker income earned while in Canada? If not, what factors would require such a person to owe taxes to the CRA?

Thanks
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Old 08-10-2013, 06:30 AM   #2254
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Re: Canadian Online Poker Tax Thread

I'm saying that you need to understand:
1. the rules for tax residence in the US
2. the rules for tax residence in Canada
3. the rules for breaking residence-residence conflicts between Canada and the US from the Canada-US tax treaty
4. the rules for taxing gambling income in Canada
5. the rules for taxing gambling income in the US
6. the source / residence allocation of taxing jurisdiction over gambling income from a Canadian perspective (if resident in Canada and source is US)
7. the source / residence allocation of taxing jurisdiction over gambling income from an American perspective (if resident in the US and source is Canada)

It's a little more complicated than counting days.
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Old 08-15-2013, 02:27 PM   #2255
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Re: Canadian Online Poker Tax Thread

Yo Henry, tried PMing you but inbox full
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Old 08-29-2013, 03:07 PM   #2256
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Re: Canadian Online Poker Tax Thread

I too am trying to send you a private message but it wont go through because of full inbox.
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Old 09-02-2013, 03:52 PM   #2257
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Re: Canadian Online Poker Tax Thread

Quote:
Originally Posted by TaxGuru View Post
There are reasonably strong attractions to incorporating. I don't believe that any of the legal hurdles mentioned above cut against incorporation for the long-term winning player.
I'm currently considering incorporating. I have been playing professionally for several years and paying taxes most of that time. I discussed incorporating with my accountant years ago but ended up dismissing it for whatever reason.

In the past few years, my poker income has increased, and now I am reconsidering the idea. My accountant advises me that it would be in my best interest to do so IF I thought I was going to be making this kind of money for another ~3+ years. As I'm sure everyone is aware, this kind of certainty does not exist in the world of online poker (and I may even choose to transition out of this crazy game within the next few years).

Can any posters confirm for me that what my accountant is saying makes sense? Might it be smart for me to incorporate even if I only intend to play professionally for another 2 years maximum? Anything else I should be aware of?

Any comments appreciated.
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Old 09-10-2013, 01:53 PM   #2258
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Re: Canadian Online Poker Tax Thread

Hey guys,

Sorry if my questions may have been asked countless times, the thread is veeeeeery long and dense, read a few pages but would like to ask a question still.

I'm a French player, and right now in France the tax situation is pretty awful as we're pretty much bound to pay 50-55% (grosso modo) of our revenue. I'm considering moving abroad, and might go for Canada as it'd be pretty for my gf to land a job there.

So questions :

1/ If I understand correctly, what most players do is not declare and pray they never have problems right ? (which would be a +ev decision according to the few posts I read)
2/ Suppose I'm worn off of my troubles with France (currently under a tax control procedure :/) wanna be extremely clean towards the Canadian state and end up declaring myself as a professionnal. What would be an average taxrate if I make ~100-150k€/yr ? (side question : is it a pain in the ass to declare yourself a professional like it is in France ?)

Again sorry if my questions have been answered already, and thanks in advance.
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Old 09-17-2013, 08:28 PM   #2259
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Re: Canadian Online Poker Tax Thread

Quote:
Originally Posted by ArtPlay View Post
Hey guys,

Sorry if my questions may have been asked countless times, the thread is veeeeeery long and dense, read a few pages but would like to ask a question still.

I'm a French player, and right now in France the tax situation is pretty awful as we're pretty much bound to pay 50-55% (grosso modo) of our revenue. I'm considering moving abroad, and might go for Canada as it'd be pretty for my gf to land a job there.

So questions :

1/ If I understand correctly, what most players do is not declare and pray they never have problems right ? (which would be a +ev decision according to the few posts I read)
2/ Suppose I'm worn off of my troubles with France (currently under a tax control procedure :/) wanna be extremely clean towards the Canadian state and end up declaring myself as a professionnal. What would be an average taxrate if I make ~100-150k€/yr ? (side question : is it a pain in the ass to declare yourself a professional like it is in France ?)

Again sorry if my questions have been answered already, and thanks in advance.
tax rate would be about the same 50-55 but maybe other ways through incorporating that could lessen that. Not sure how it works for a foreigner and also not sure how well you will do playing poker outside of the fenced in games in france that are pretty loose and juicy.
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Old 09-30-2013, 12:58 PM   #2260
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Re: Canadian Online Poker Tax Thread

1 month already and nobody posted about it :

http://decisions.fct-cf.gc.ca/site/f.../1/document.do

What u guys think ?
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Old 09-30-2013, 03:51 PM   #2261
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Re: Canadian Online Poker Tax Thread

Just gave it a skim and it looks very interesting.. Can't wait to see what some of the experts in here think about it!
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Old 09-30-2013, 04:43 PM   #2262
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Re: Canadian Online Poker Tax Thread

The key part of the judgment is at paragraphs 50 to 53 (this is a long block quote from the judgment at http://www.canlii.org/en/ca/fct/doc/...2013fc916.html ):

[50] I recognize that it was the Applicant who first declared his poker winnings to be taxable income, and he paid tax on them and claimed deductions. He now says that CRA should not have agreed with him back in 2004, 2005, 2006 and 2007. Had the Applicant made an appeal to the Tax Court he might have succeeded. As the Federal Court of Appeal pointed out in Abraham, above, he now has “no entitlement to have the error corrected.” Recourse under subsection 152(4.2) of the Act is a request for an exercise of discretion and there is “nothing in subsection 152 (4.2) that requires the Minister to exercise [her] discretion in favour of the taxpayer if the taxpayer would be entitled to a tax benefit if he or she claimed within the regular re-assessment period.”

[51] Notwithstanding these caveats, upon reviewing the record as a whole, I have to conclude that the Applicant has made his case. The Minister’s exercise of her discretion under subsection 152(4.2) of the Act in this case lacks intelligibility and justification and, in my view, falls outside the range of possible, acceptable outcomes which are defensible in respect of the facts and law.

[52] I say this for the following reasons:
a) The Minister in this case relied upon the fact of winning and, in effect, conducted the kind of retrospective assessment warned against by Justice Bowman in Leblanc, above, as part of the assessment of reasonable expectation of profit;
b) The Minister concludes that the Applicant had a “system” but does not provide any meaningful explanation of what this system might be. It looks as though the Applicant’s simply playing online poker on his computer on an intense and regular basis over an extended period of time is equated with a system. This is bolstered by the Leblanc fallacy that, because he happened to win more than he lost during the three years in question, he must have had a system. I see no evidence of the Applicant applying a system in a way that would make this conclusion by the Minister intelligible or reasonable.
c) The Minister’s reliance upon Luprypa, above, is misplaced and unreasonable. I see no analogy between a skilful pool player who systematically applied his skills to make money from inebriated opponents and anything the Applicant did in this case where, essentially, his winnings were dependent upon chance, even though he had studied, practised and improved his skills in a way that most amateur poker players do. Everyone who competes in online poker wants to win and will attempt to narrow the odds in their favour in any way they can. But this does not mean they have devised a system if they do win; chance remains the predominant factor in whether they win or lose, as it did on the facts of this case;
d) The method of payment used was no indicator of a “system” or a reasonable expectation of profits. Everyone who wants to pay has to set up some kind of payment system, so this cannot be an indication of running a business. Paypal accounts are used in a variety of contexts where payment is required online;
e) The Applicant’s cutting back on other work and income while he won at poker is also no indicator of a system or running a business with a reasonable expectation of profit. A large gambling win could result in the winner quitting work entirely, but that would not mean he or she had been running a business. The luxury of being able to work less is one of the fruits of successful gambling, just as having to work more may be one of the results of unsuccessful gambling. Chance dictates the outcome in either case;
f) The use of winnings to finance a mortgage is no indication of running a business. Winnings can be used in a constructive way. The gambler is not obliged to play until he or she loses, and the use of winnings in this case was no indicator of a system or a business that was being run with a reasonable expectation of profit;
g) There is no indication that the monitors or other equipment which the Applicant used to gamble in this case were anything special or that the Applicant had made capital investments for the purpose of running a business or earning a profit;
h) The Applicant’s record keeping was minimal and entirely consistent with the need to prove the source of funds for tax purposes. They were not business records in any meaningful way, and did not even correlate to CRA’s own criteria.
[53] There are other points of concern but, generally speaking, I think this is enough to conclude that there was nothing in the Applicant’s case to set him apart from the usual enthusiastic and ever-hopeful poker player engaged in a personal endeavour. The factors relied upon by the Minister to conclude otherwise render the Decision unreasonable within the meaning of paragraph 47 of Dunsmuir.

JUDGMENT

THIS COURT’S JUDGMENT is that
1. The application is granted. The Decision is quashed and set aside and returned for reconsideration in accordance with these Reasons.
2. The Respondent shall pay the Applicant’s costs in this application in the amount of $1,550.00 to cover the cost of tax advice, Court fees, photocopying and income loss to be at the hearing, together with post-judgment interest until paid.
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Old 09-30-2013, 04:52 PM   #2263
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Re: Canadian Online Poker Tax Thread

Also this:

[44] Gambling cases can be difficult to assess, but the jurisprudence is clear that whether an individual is involved in a business depends upon the specific facts of each case and there is no authority or principle which says that the fruits of gambling cannot be taxable. It all depends in each case upon whether the gambling is conducted in a sufficiently commercial manner, and that assessment requires an examination of a wide range of factors, such as occurred in this case. See Stewart v Canada, 2002 SCC 46 (CanLII), [2002] 2 SCR 645, 2002 SCC 46 at paragraph 52; Cohen, above; and Belawski v Canada (Minister of Natural Revenue), 1954 CarswellNat 152, 11 Tax ABC 299 (TAB) at paragraph 3.
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Old 09-30-2013, 05:32 PM   #2264
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Re: Canadian Online Poker Tax Thread

What do you make of it TaxGuru ? I barely see any points in favor of the cra in that judgment. Even the point you quote [44] looks to me as if to be in the "business" of gambling you have to do it in a "commercial manner" which nobody does by playing online.

For now all cases have been against the CRA, I don't see how they could win with yet an other judgment against them. The battle isn't over yet, I'd guess, as this case wasn't about whether or not poker was taxable...
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Old 09-30-2013, 05:47 PM   #2265
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Re: Canadian Online Poker Tax Thread

Ya that's heartening to see.
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Old 09-30-2013, 05:58 PM   #2266
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Re: Canadian Online Poker Tax Thread

Doesn't change much. The line "reasonable expectation of profit" is open to interpretation big time and in this case the judge decided the minister had to show more than: he profited therefore he had a reasonable expectation to profit.

The bottom line for me is it is possible to prove some poker players might have a reasonable expectation to profit but it would have to be done on a case by case basis and I doubt the CRA is going to want to fight every case in court. If you dispute this then tell me who has a reasonable expectation to profit in the Durrr vs Isildur match (besides Full Tilt)?

To prove a reasonable expectation of profit you need to back it up with math, you can prove the house has an edge in Blackjack, you can prove card counters can gain an edge, which shows they have a reasonable expectation to profit (but profit isn't guaranteed). With poker, even if you discount the rake, its hard to prove player A has an edge over player B because its not a static situation, in an instant Player B can adapt and gain the edge.
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Old 09-30-2013, 07:27 PM   #2267
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Re: Canadian Online Poker Tax Thread

Although it is not unrelated, the case is not one that is directly on the point of the taxability of winnings from poker. Instead, the legal question before the court was whether the discretion that was exercised by the Minister was exercised reasonably. In answering this question, the court is supposed to give the Minister significant latitude to show that her discretion was exercised in a reasonable way (this means that it tends to be rather difficult to challenge). In my view, the taxpayer in this case faced an uphill battle. Nonetheless, based on the judgment, it also seems that the CRA did not do a careful or thoughtful job. To some extent, time will have to tell what to make of this judgment. If you are inclined to believe that it adds punch to Leblanc and Cohen, then it is possible to spin it in this direction. If you are inclined to see it as a fact-dependent and narrow rebuke of the Minister's actions with respect to this one particular taxpayer, you can spin it that way too. From the point of clarifying the law on the question of the taxation of winnings from poker, to the extent that it militates in either direction, it is clearly at least a nudge in favour of the view that there is a strong (rebuttable) presumption that winnings from poker by individual players will not typically be taxable as income from business.
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Old 09-30-2013, 08:13 PM   #2268
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Re: Canadian Online Poker Tax Thread

The judge cites with approval this article, which you should read if you haven't before: http://ssrn.com/abstract=1971415
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Old 09-30-2013, 08:17 PM   #2269
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Re: Canadian Online Poker Tax Thread

There is other commentary on the case here: http://www.canadiantaxlitigation.com...+by+Dentons%29
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Old 10-01-2013, 12:54 AM   #2270
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Re: Canadian Online Poker Tax Thread

So what was the conclusion here for those of us that can't speak legal-ize?

My understanding is the judge basically said he isn't sure if the income is taxable or not but the arguments the CRA had used that it is were insufficient, so he told them to do another review and come up with better arguments or give him his money back. Is that right? Will we ever get the final outcome?
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Old 10-01-2013, 07:08 AM   #2271
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Re: Canadian Online Poker Tax Thread

The judge did punt it back to the Minister. Before the Minister does anything, the government will need to decide whether to appeal the decision. If there is an appeal, then we will have to wait to see if the Federal Court of Appeal allows the appeal from the decision of the Federal Court.

If there is no appeal from the judgment of the Federal Court, then the Minister will need to reconsider her decision "in accordance with" the reasons of Justice Russell at the Federal Court. The Minister will carefully read the judgment and decide on the course of action that is most in keeping with the reasons. What then will the Minister do?

It is clear from the reasoning in paragraph 53 of the judgment that the Federal Court believes that it would be quite difficult for the Minister to justify taxing Radonjic. The primary reasons are (1) the logical moves made by the Minister that Justice Russell doesn't like, (2) the legal precedents, and (3) the facts of the case.

The two logical moves that Justice Russell resists have been identified before in the case law. The first of these goes as follows: "you won at poker, so you must have had a system to win at poker." Without the Minister actually showing that there was a system, Justice Russell is hostile to this "reasoning from results." The second is that: "you kept records of your wins and losses, so you must have been running something tantamount to a commercial operation." Obviously, if there were no records it would be difficult for taxpayers to show poker as the source of funds. And if you can't prove the source of funds then the Minister can assume that they are from a taxable source. So Justice Russell did not accept this reasoning, either.

On the legal precedents, Justice Russell did not say very much. I read the judgment as an acceptance that the key decisions in this area are Leblanc (winnings not taxable) and Cohen (losses not deductible). These two cases read alongside the judgment here in Radonjic reinforce the strong presumption that poker winnings are not taxable unless you're engaged in poker in a way that elevates your activity above the level of an enthusiastic amateur player.

Finally, on the facts Justice Russell made some determinations that will make it difficult for the Minister not to find in the taxpayer's favour. The most favourable is this line, from paragraph 53(b): "I see no evidence of the Applicant applying a system in a way that would make this conclusion by the Minister intelligible or reasonable." In my view, this basically settles the question of what the Minister should do if there is no appeal or if there is an appeal and it is not allowed.

Incidentally, the player here did an amazing job representing himself before the Federal Court. He should be commended.
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Old 10-01-2013, 11:01 AM   #2272
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Re: Canadian Online Poker Tax Thread

Hi guys,

I am an American professional poker player that moved to Canada after black friday. I currently plan to spend 11 months/year in Canada for the foreseeable future. I am here under a 'visitor' status that I apply to have extended every six months. I have no ties to Canada except for a Canadian bank account that I use for all my poker transactions. I have been torn as to whether I should be paying Canadian taxes or not. After reading the Radonjic case, as well as the article TaxGuru posted, I am leaning towards not declaring my income for Canadian taxes.

I would say that the only difference between myself and Radonjic is that I moved out of the US to continue playing. After reading the article TaxGuru posted, the thing that sticks out to me is that even if I have all the attributes of a professional poker player, it states: "...in light of the case law it would not be guaranteed that the minister would succeed in attempting to characterize the taxpayer as being in the business of playing poker."

Based on these two articles, am I correct in assuming the chances of the CRA coming after me in the future and winning their case would be quite slim? I know there can't be any guarantees, but I would like to hear a little assurance on this.

It is also worth noting that all gambling winnings are taxable in the US, so I would still be paying US taxes. I file as a "professional gambler" for tax purposes.
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Old 10-01-2013, 11:04 AM   #2273
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Re: Canadian Online Poker Tax Thread

I would also like to hear what the Canadian pros are doing in light of the Radonjic case. For those who have been paying taxes, are you going to stop? Are you going to try to recover your taxes paid like Radonjic?
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Old 10-01-2013, 02:31 PM   #2274
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Re: Canadian Online Poker Tax Thread

Quote:
Originally Posted by b_bylander View Post
It is also worth noting that all gambling winnings are taxable in the US, so I would still be paying US taxes. I file as a "professional gambler" for tax purposes.
I am very curious about this as well. Would filing in the US as a professional gambler automatically require you to do the same in Canada and declare all of your poker winnings as income since you did so on your US taxes?
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Old 10-01-2013, 02:32 PM   #2275
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Re: Canadian Online Poker Tax Thread

I would definitely try to get the money back, you lose time and court fees compared with gaining back potentially 100s of thousands in taxes you had or would have had to pay, plus immunity and peace of mind. Seems like a no brainer to me.
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