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Canadian Online Poker Tax Thread Canadian Online Poker Tax Thread

11-03-2013 , 10:01 PM
Hey guys, quick update.

The CRA has chosen NOT to appeal.
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11-03-2013 , 10:04 PM
Quote:
Originally Posted by DonnieG843
I feel I already know the answer to this, but Iíll post my situation anyways

A little about me:

1) I have a full time job that pays $85,000 a year.
2) I also do some freelance marketing work on the side and earn about $10,000 a year, which I also declare
3) Iíve been online sports betting casually for the past 13 years, losing between $1,000 and $10,000 each year from 2002 to 2012
4) This year Iíve adopted a very different approach which has resulted in over $150,000 in online sports betting winnings. My winnings didnít come from one long shot bet but from 1000ís of bets with bet sizes ranging between $1 and $20,000. I place on average 10 bets a day, just about every day.
5) I spread my bets across multiple sports betting sites, looking for the best odds
6) In some cases Iíve been ďlimitedĒ to the amount I could bet at some sports betting sites because they see me as a threat as Iím winning too much with them, and they could see that Iím always looking for value in the bets I place (ie placing bets only when theyíre offering better odds than the competition).

Do you think the CRA will consider this 1st year of large winnings as me crossing the line to being a professional? Or does it take several years of consistent winnings?

Also, lets say for argument sake that Iím not considered professional this first year, but I continue at this 150k/year pace for the next 3 years. Will the CRA look back in 3 years from now and say that I showed consistent profit for the last 3 years so I am considered a professional and to be taxed for those 3 years (even though I wasnít considered a professional when I was actually in my 1st year of profitability)?
It is very very unlikely that you would be found taxable. Of course the CRA will start from the position that you are taxable, and drag you through the process I went through.
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11-03-2013 , 11:20 PM
Quote:
Originally Posted by Equal
Of course the CRA will start from the position that you are taxable, and drag you through the process I went through.
This of course is likely why the CRA did not appeal this case, they thought if they took it higher and if the ruling was upheld on appeal it would set a strong precedent. Whereas this is one ruling and does have value in terms of guidance, but it doesn't have the strength as if it had been upheld on appeal. And it doesn't make it a 100% certainly by any means that someone else won't have to fight a similar battle again. The CRA after all may choose to fight this battle another day with a different case, where they feel the facts are more in their favour. This legal tactic is far from unique to the CRA and poker.
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11-04-2013 , 06:54 AM
Quote:
Originally Posted by Equal
Hey guys, quick update.

The CRA has chosen NOT to appeal.
Congrats, essentially a windfall eh?

It'll be interesting to see how many follow your lead and how resistant the CRA will be from here on out. Do they all get a memo on this sort of thing or will it be reviewed on a case by case basis until it finally does get decided in the courts?
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11-04-2013 , 10:57 AM
Quote:
Originally Posted by Equal
Hey guys, quick update.

The CRA has chosen NOT to appeal.
Hey congrats!

Question though... Does the decision mean that your gambling winnings will be considered non taxable and returned to you, or does it only mean that the CRA will be required to reassess the years in question? If its just the reassessment does that mean that you might have to go through more pain trying to prove your poker winnings aren't a business?
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11-04-2013 , 05:02 PM
Pretty sure it means he's getting his manies back.
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11-06-2013 , 08:55 AM
Quote:
Originally Posted by Equal
Apparently it will be at least "4-6 more weeks".
Any info yet?
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11-06-2013 , 09:57 AM
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Originally Posted by jrockhaf
Any info yet?
disregard this
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11-07-2013 , 02:01 AM
Not a peep from the CRA so far...
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11-08-2013 , 10:02 PM


WE WON!!! The re-assessments of my tax years arrived in the mail today and the cheque for 6 figs is on it's way!!!

Thanks to everyone I talked to, but especially Mr. Ben Alarie. He is the man that made it all happen with his exhaustive research and his ground-breaking paper on the taxation of gamblers.
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11-08-2013 , 10:03 PM
You boys can start your assault on the CRA today!!
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11-09-2013 , 03:47 AM
Wowsers! Congrats!!

If there is an assault I bet it won't be long before they either fight a little harder or make an amendment to the tax code. The early birds will probably get the most worms.
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11-09-2013 , 12:44 PM
Congrats! It will be very interesting to see how things unfold from here on...
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11-09-2013 , 02:40 PM
Quote:
Originally Posted by Equal


WE WON!!! The re-assessments of my tax years arrived in the mail today and the cheque for 6 figs is on it's way!!!

Thanks to everyone I talked to, but especially Mr. Ben Alarie. He is the man that made it all happen with his exhaustive research and his ground-breaking paper on the taxation of gamblers.
Just amazing, congrats and GL to guys like Mossberg in getting after the CRA.
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11-09-2013 , 08:44 PM
Very good news. Congrats.
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11-11-2013 , 11:56 AM
Quote:
Originally Posted by sippin_criss
Just amazing, congrats and GL to guys like Mossberg in getting after the CRA.
Who is Mossberg ?
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11-11-2013 , 08:38 PM
Me. Not sure how it got out, but I am considering amending my returns for the past several years (based on the Radonjic case) and seeing how the CRA responds.
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11-12-2013 , 01:13 AM
Quote:
Originally Posted by Mossberg
Me. Not sure how it got out, but I am considering amending my returns for the past several years (based on the Radonjic case) and seeing how the CRA responds.
Considering? Besides time what do you have lose?
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11-12-2013 , 07:03 PM
Not much, it seems. I'm just not entirely convinced that the Radonjic case is all that relevant to my own, but hopefully I'll get a better sense of that in the very near future.
Canadian Online Poker Tax Thread Quote
11-12-2013 , 08:55 PM
Quote:
Originally Posted by Mossberg
Not much, it seems. I'm just not entirely convinced that the Radonjic case is all that relevant to my own, but hopefully I'll get a better sense of that in the very near future.
I just got back from a meeting with a tax attorney in regards to this case. I was super excited before i got there and am now kinda depressed.

To sum it up

-The CRA can appeal this decision if they want to the Supreme Court. Even after making payment back to the "Applicant"
-This is not a precedent. Each case is determined on its own merits, even the slightest difference can make/break a decision
-If It is decided that poker winnings are not taxable as it's not a business, what does future income fall under? You can't have a"windfall" for the next 20 years
-If I amend my returns be prepared for a full audit and be on the CRA's "radar"
-The CRA will not let go off a ton of cash due to some judge's ruling, they can just amend the tax act to compensate for the ruling in the very near future and they can retroactively enforce the law for a period of 10 years. (Apparently it's the only section of law that where the government can create a new law and retroactively enforce it.) The example that was given to me today was that the CRA can all of a sudden double everyone effective tax rate and retroactively enforce it for the previous 10 years if they wanted. Very unique section of the law
-My main concern was the issue of income tax owing from future earnings and the CRA will not take lightly due a prson who has filed for years and then all of a sudden decide not to file based on a case that is not precedent setting.
-A whole other slew of issues

Still not giving up, but a little discouraged at the moment
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11-13-2013 , 12:04 AM
That all makes sense. I discussed a few of those issues with Ben Alarie and his view seems to be a bit more optimistic (especially with regards to potential amendments to the tax act and retroactive enforcement).

Now does seem like an ideal time for someone to take a shot at it though, and hopefully finally add some clarity to the taxation situation for everyone else.

Last edited by Mossberg; 11-13-2013 at 12:12 AM.
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11-13-2013 , 12:40 AM
Quote:
-The CRA can appeal this decision if they want to the Supreme Court. Even after making payment back to the "Applicant"
The CRA already notified there would be no appeal in my case. Now, you are making me wonder if they can say no appeal, pay me, and then retro-appeal after? That makes no sense to me. But I will look into this, thanks.

Quote:
-This is not a precedent. Each case is determined on its own merits, even the slightest difference can make/break a decision
The CRA will always take the position that judgment that go against them are not precedents. That is BS though. All that matters is what judges say in judgments. What the CRA says means nothing - it's their opinion and they always lean way in their favour. They always try to have their cake and eat it too. Yes, each case is looked at on its own merits. But most online poker players cases will be substantially similar to mine. The Justice even rebuked the CRA for trying to sell him on that my online poker case was most similar to the billiards player case than the OTHER online poker case (Cohen). But this is a huge precedent, don't let anyone tell you otherwise. If you take the CRA to court, what is important to the judge is the existing jurisprudence, that's all.

Quote:
-If It is decided that poker winnings are not taxable as it's not a business, what does future income fall under? You can't have a"windfall" for the next 20 years
You are missing the elephant in the room. There is the entire weight of Canadian tax history that has repeatedly decided gambling winnings are not taxable except in exceptional circumstances - this includes having inside information, having a measurable physical skill (like being a PGA golf pro) or running the gambling games. Or if you are a poker pro like Daniel Negreanu, with books, endorsements, etc. If they start taxing gambling winnings then people will have cases for claiming gambling losses - and there's a lot more of those. They can't open that door.

Quote:
-If I amend my returns be prepared for a full audit and be on the CRA's "radar"
Yep, every poker pro will be audited at some point. There's no avoiding it. Honestly, it's not that big of a deal. Especially since we aren't running a business that would get eviscerated by the CRA rejecting expenses. My audit consisted of an interview by someone who was terrible at interviewing and didn't understand poker. They took my box of documents I brought to them, and gave it back to me months later saying "we accept your returns as filed". They missed some things in my documents and receipts that could have strengthened their case if they knew what to look for.

Quote:
-The CRA will not let go off a ton of cash due to some judge's ruling, they can just amend the tax act to compensate for the ruling in the very near future and they can retroactively enforce the law for a period of 10 years. (Apparently it's the only section of law that where the government can create a new law and retroa
I don't doubt this; but I will repeat that the only thing that matters is what a judge rules. Poker is a drop in the bucket compared to the big fish. We are a small enough group that the CRA will deal with us one by one.

Quote:
-My main concern was the issue of income tax owing from future earnings and the CRA will not take lightly due a prson who has filed for years and then all of a sudden decide not to file based on a case that is not precedent setting.
As I said before, it's a precedent. Do not get bullied by the CRA trying to convince you otherwise.

The table is set. With my judgment, now the rest of you guys have it so easy you have no idea. The biggest threat I think is if the CRA hires a pro poker player as a consultant. Because my huge advantage in the Federal Court was that the DoJ lawyers, the CRA audit team, and the Justice all did not know poker. Because of that I was able to frame the judge's understanding of poker in a way I wanted and needed to, and the DoJ lawyers couldn't really dispute.
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11-13-2013 , 04:54 AM
Quote:
Originally Posted by Equal



The CRA will always take the position that judgment that go against them are not precedents. That is BS though. All that matters is what judges say in judgments. What the CRA says means nothing - it's their opinion and they always lean way in their favour. They always try to have their cake and eat it too. Yes, each case is looked at on its own merits. But most online poker players cases will be substantially similar to mine. The Justice even rebuked the CRA for trying to sell him on that my online poker case was most similar to the billiards player case than the OTHER online poker case (Cohen). But this is a huge precedent, don't let anyone tell you otherwise. If you take the CRA to court, what is important to the judge is the existing jurisprudence, that's all.

.
I'm no legal scholar by any stretch but I'm thinking if they take it to the courts again they'll need to have some new and better arguments or the judge won't let them waste much of his time.

A retroactive amendment would suck for all of us though including Equal, I can't believe thats even an option. Imagine if somebody wins lotto 6/49 spends it all then a few years later the government comes knocking for a few million. Man that would suck.

Last edited by roy_miami; 11-13-2013 at 05:06 AM.
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11-13-2013 , 12:19 PM
Retroactive changes are not likely. I have written about retroactive tax law in another context (the general anti-avoidance rule).

http://papers.ssrn.com/sol3/papers.c...act_id=1107489

Also, the Radonjic (2013) judgment is consistent with both Leblanc (2006) and Cohen (2011). As the new "gambling trilogy", these cases lead to a very strong presumption that gambling winnings are not taxable and that gambling losses are not deductible.

Most tax lawyers have not thought about these issues in depth and also do not understand much about poker. My self-serving view is that you're better off speaking with folks who have familiarity with both.
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11-14-2013 , 08:22 AM
The other thing to remember is that when tax law changes, it almost always changes in a forward-looking way. The government is hesitant to disrupt reasonable expectations about the tax law. If they change the rules willy-nilly retroactively, it irritates honest taxpayers, damages general tax morale, and reduces general social respect for tax compliance. When there are retroactive changes, they often surround very unexpected and complex tax avoidance schemes that many tax professionals would have found suspect anyway (one recent example of a very few is the Quebec truffle scheme: http://www.finances.gouv.qc.ca/docum...aelnkandev.pdf)
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