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Old 08-18-2011, 02:40 AM   #26
LT22
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Re: Risky sites, the casualty loss, and possible implications for *future* play post-Black Frid

you are misinterpreting the constructive receipt quote IMO.

We had the ability to cash out up until April 15, 2011. Winnings before April 15th would fall under this part in my opinion, "the taxpayer may draw upon it during the taxable year if notice of intention to withdraw had been given"

If you had winnings on FT/Cereus AFTER April 15, 2011, then I would say that is the case you bolded above. You won the money but would not have the ability to collect.
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Old 08-18-2011, 02:46 AM   #27
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Re: Risky sites, the casualty loss, and possible implications for *future* play post-Black Frid

Well when I attempted to cash out part of my money I received checks from Full Tilt that bounced causing me to incur bank fees. Therefore I made an effort to get my money but seeing as I did not want to get hit with more bank fees I did not want to keep requesting money that I was not entirely sure even existed and then after the events of black friday the company still has not made an efforts to pay me I would consider that meeting the definition of constructive receipt.

Would you not agree that getting bounced checks would fall under "substantial limitations?"
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Old 08-18-2011, 02:52 AM   #28
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Re: Risky sites, the casualty loss, and possible implications for *future* play post-Black Frid

In my opinion, no, they made an effort to pay you. The fact you stopped requesting checks is not relevant IMO. You had the ability to request a payout and FT was making an effort to pay you.

just my 2 cents bro
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Old 08-18-2011, 03:00 AM   #29
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Re: Risky sites, the casualty loss, and possible implications for *future* play post-Black Frid

Thank you for your opinion LT22, I know its late but I would also appreciate other responses later on. As for me tomorrow I am going to the IRS office here in my local state and see if I can not set up an appointment and get some answers. I got a lot of free time until school starts so why not.

Its times like this that I hate being the thorough person that I am or try to be.
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Old 08-18-2011, 04:27 AM   #30
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Re: Risky sites, the casualty loss, and possible implications for *future* play post-Black Frid

Quote:
Originally Posted by Nyu View Post
Well when I attempted to cash out part of my money I received checks from Full Tilt that bounced causing me to incur bank fees. Therefore I made an effort to get my money but seeing as I did not want to get hit with more bank fees I did not want to keep requesting money that I was not entirely sure even existed and then after the events of black friday the company still has not made an efforts to pay me I would consider that meeting the definition of constructive receipt.

Would you not agree that getting bounced checks would fall under "substantial limitations?"
I think this could fall under the Doctrine of Cash Equivalence. This doctrine requires that a promise to pay (e.g., a check) must meet five criteria to be considered a cash equivalence and therefore receipt of income for tax purposes:
  1. the promise to pay is unconditional;
  2. the promise is made by a solvent person;
  3. the promise is assignable;
  4. the promise is not subject to set-offs; and
  5. the promise is marketable.

The bounced checks puts #2 into question, as do the revelations since BF about FTP's finances.
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Old 08-18-2011, 08:29 AM   #31
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Originally Posted by Nyu View Post
Thank you for your opinion LT22, I know its late but I would also appreciate other responses later on. As for me tomorrow I am going to the IRS office here in my local state and see if I can not set up an appointment and get some answers. I got a lot of free time until school starts so why not.

Its times like this that I hate being the thorough person that I am or try to be.
Let us know if you learn anything from the IRS. And thanks, on behalf of all of us affected by this situation. We appreciate the thoroughness.
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Old 08-18-2011, 08:30 AM   #32
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I think this could fall under the Doctrine of Cash Equivalence. This doctrine requires that a promise to pay (e.g., a check) must meet five criteria to be considered a cash equivalence and therefore receipt of income for tax purposes:
  1. the promise to pay is unconditional;
  2. the promise is made by a solvent person;
  3. the promise is assignable;
  4. the promise is not subject to set-offs; and
  5. the promise is marketable.

The bounced checks puts #2 into question, as do the revelations since BF about FTP's finances.
This seems interesting and promising. I think it is very easy to argue that FTP was insolvent at this point.
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Old 08-18-2011, 11:44 AM   #33
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Re: Risky sites, the casualty loss, and possible implications for *future* play post-Black Frid

Not that it's necessarily a complete waste of time to inquire, but I personally wouldn't put much stock, if any, in one IRS representative's take is on the applicability of constructive receipt to 2011 online poker winnings before Black Friday.

Why? A couple of reasons immediately come to mind:

1) I doubt the representative will fully understand the facts. It's also unlikely to convince a low-level auditor of the position. A taxpayer's best chance to prevail on this issue is likely either with IRS Appeals or in Tax Court.

2) An IRS opinion of the law is not binding authority. It can't be completely relied on to justify a taxpayer's position. If the taxpayer's position (that was also an opinion of the IRS) is later challenged by the IRS, the taxpayer may say he relied on the IRS interpretation, but it will likely only be helpful in fighting penalties, if at all. If the taxpayer loses, the taxpayer is still liable for the additional tax owed, plus interest.

Some possible arguments are raised that may justify the position that not all winnings were constructively received. It may just be a long and hard-fought effort to prevail. For taxpayers with larger amounts at stake, such effort may be worth it. Of course, a taxpayer should always consult with a tax professional to comprehensively review his particular facts and circumstances.
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Old 08-18-2011, 11:51 AM   #34
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Re: Risky sites, the casualty loss, and possible implications for *future* play post-Black Frid

Quote:
Originally Posted by PokerXanadu View Post
I think this could fall under the Doctrine of Cash Equivalence. This doctrine requires that a promise to pay (e.g., a check) must meet five criteria to be considered a cash equivalence and therefore receipt of income for tax purposes:
  1. the promise to pay is unconditional;
  2. the promise is made by a solvent person;
  3. the promise is assignable;
  4. the promise is not subject to set-offs; and
  5. the promise is marketable.

The bounced checks puts #2 into question, as do the revelations since BF about FTP's finances.
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Originally Posted by repulse View Post
This seems interesting and promising. I think it is very easy to argue that FTP was insolvent at this point.
xanadu,
Thanks for digging up that link. Bounced checks don't imply a solvency issue IMO. There are numerous reasons for bounced checks. What revelations since BF would show FTP was insolvent BEFORE BF?

repulse,
You say, "...was insolvent at this point." At what point are you talking about?
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Old 08-18-2011, 01:31 PM   #35
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Re: Risky sites, the casualty loss, and possible implications for *future* play post-Black Frid

I agree with Taxdood about meeting with the IRS. When you meet with the IRS, you will be meeting with an employee who almost certainly will not understand the issues. Indeed, most employees of the IRS do not understand gambling issues. Given that the IRS is not bound by the advice given to you, and you may still owe penalties by relying on said advice, and that statistically just under one-third of the time IRS advice is wrong, this is likely not a good use of time.

Regarding constructive receipt, today no one knows what the situation will be with regards to Full Tilt. It's possible that in 30 days everyone will be obtaining their money; it's possible that in 30 days Full Tilt will declare bankruptcy (or the equivalent). We just do not know today whether the substantial limitation test will or won't apply to Full Tilt. At a minimum, it's arguable that it does.

-- Russ Fox
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Old 08-18-2011, 04:02 PM   #36
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Re: Risky sites, the casualty loss, and possible implications for *future* play post-Black Frid

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Originally Posted by LT22 View Post
xanadu,
Thanks for digging up that link. Bounced checks don't imply a solvency issue IMO. There are numerous reasons for bounced checks. What revelations since BF would show FTP was insolvent BEFORE BF?
Most significantly, the $60M in uncollected player deposits which was floated on the player accounts.
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Old 08-18-2011, 04:20 PM   #37
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Much of which was collected IIRC. We don't know FTPs financial situation pre BF. Frankly I get annoyed when people (not you, previous experiences such as Quadjacks idiots running their mouths) act like they know for a fact that FTP was busto pre-BF.

FTP is clearly not able to cover player balances POST BF, but it's pretty easy to understand why. The government has our money as well as FTPs.

My main point: Post-BF insolvent =/= pre BF insolvent. I'm not sure of the tax implications of being insolvent now but you have to assume they were solvent pre-BF which is when personal income was generated on FTP.

It would certainly look foolish for people to say, "we has significant worries about FTP solvency pre-BF but yet I continued to generate all my income there." The IRS prob laugh in your face if you told them you truly believed you were working with an insolvent company.

Like I said I'm not sure where the law stands on this as it is such a unique situation and these are merely my opinions.

As Russ said, the best strategy right now is to wait and see what happens. If we get very close to the end of 2011 without clear cut answers from FTP/ the DOJ, then I will start seeking professional advice from those qualified. The big prob is even those qualified might not be able to give a solid interpretation of the law in this unique situation.
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Old 08-18-2011, 06:00 PM   #38
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repulse,
You say, "...was insolvent at this point." At what point are you talking about?
I was referring to at or around BF, because of the 60M shortfall, but yeah, you are right. I see what you're saying, we wouldn't be able to figure out how far before BF they were insolvent just because they were afterward, and the shortfall on its own doesn't imply insolvency. So, never mind! But still a potentially interesting means of attack, potentially.
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Old 08-19-2011, 01:00 AM   #39
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Re: Risky sites, the casualty loss, and possible implications for *future* play post-Black Frid

Glad there's some more detailed discussion on this issue. Another fact scenario is Americans who relocated and played/ran up balances on FT post-BF. I had a bunch of WD's processing in June, but like many players was unable to get a dime off the site before Alderney pulled the plug.

Somewhat OT, but I'll harp on it again - it would be awesome if Congress addressed the taxation issue in a poker bill (whether just for regulated online poker or gambling taxation period). If they don't, a lot of amateur players are going to be in for a rude awakening on the federal, and especially (in some cases) on the State level. Like lol-tastic bad.

Hopefully they can add some language/income categorization in an iPoker bill so that anyone (professional or amateur) can net their wins/losses for the year. I.e., your final number (cumulative for all sites you play - assuming all have some year-end reporting requirement to the Feds) counts as a single win or loss. Or some other scheme so that amateurs in States that don't allow deductions of gambling losses aren't faced with massive tax bills (even if they lost money gambling).

Otherwise, several years into US iPoker and a lot of amateur players will boycott the US sites b/c too many people got surprised/upset/screwed on their tax bill. Maybe the States/feds will take in more tax revenues the first year or two before people catch on, but years 3-infinity will be a lot less $$ into State/Federal coffers.
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Old 08-19-2011, 03:40 AM   #40
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Re: Risky sites, the casualty loss, and possible implications for *future* play post-Black Frid

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Sadly you may be correct.

The IRS sees this as two unique events which are handled separately. The gambling wins are a series of events which create a new unearned income. The site loss is a separate taxable event. The IRS doesn't care that the "rules" are unfair in that they require you to pay taxes on what but not be able to deduct the other.

That being said, I never tell anyone to cheat on their taxes but if it were me this is one time I would cheat on my taxes. I wouldn't report either the gambling income or the casualty loss. With no income to spend, no bank transfer, no 1099 from the offshore site the risk of an audit is minimal and one could claim ignorance. Now ignorance doesn't get you out of the taxes if you get caught but IRS can waive penalties is they feel the underpayment was due to mistake rather than evasion. Given the extreme nature of the situation, the rarity of an event like this, and the small number of individual filers who would get this correct my guess (which is worth nothing) is that IRS would settle for taxes due. So I think it would be +EV to "forget" about the whole thing if it does happen.

However larger issue:
We need regulated US poker with segregated player funds and govt oversight, and we need is yesterday! We also need a simpler tax code but that is a battle for another day.

Maybe true. But it may have been personally slightly -EV for you to have posted this. Very very very slightly I suppose, but ...
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Old 08-19-2011, 03:45 AM   #41
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Re: Risky sites, the casualty loss, and possible implications for *future* play post-Black Frid

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This seems interesting and promising. I think it is very easy to argue that FTP was insolvent at this point.

I think it would be a lot harder than you think it would be.
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Old 08-19-2011, 10:57 AM   #42
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I think it would be a lot harder than you think it would be.
yeah, I was too optimistic at first. It would definitely be tough and complicated, and perhaps not even possible.
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Old 09-20-2011, 12:37 PM   #43
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Re: Risky sites, the casualty loss, and possible implications for *future* play post-Black Frid

Demonstrating pre-BF insolvency looks like it may have just gotten a lot easier, assuming that a DOJ allegation is any sort of precedent for tax law:

https://forumserver.twoplustwo.com/57...usdoj-1101516/

http://www.forbes.com/sites/nathanva...-ponzi-scheme/

The amended DOJ complaint even uses the phrase "phantom funds". If that doesn't support the argument that our Full Tilt balances never represented real money, I dunno what will...
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Old 09-20-2011, 02:22 PM   #44
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Re: Risky sites, the casualty loss, and possible implications for *future* play post-Black Frid

Russ Fox gives his quick take on today's news: http://www.taxabletalk.com/2011/09/2...-ponzi-scheme/
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Old 09-28-2011, 09:24 PM   #45
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Re: Risky sites, the casualty loss, and possible implications for *future* play post-Black Frid

FWIW, a take on Full Tilt funds deductibility: http://sosickbro.com/poker-news/your...tax-deductible
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Old 09-29-2011, 12:37 AM   #46
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Re: Risky sites, the casualty loss, and possible implications for *future* play post-Black Frid

I am an accountant, if you have claimed all of your poker income, yes you can claim the lost money as a casualty loss when you are certain the money is lost. Also you would not claim any winnings until you have collected the money in your possession. You could argue and have a good chance of winning the argument in tax court that until the money hits your US bank account that your winnings would not have to be claimed until then. If you were playing on new years eve, you would have to check your balance at exactly 11:59.59 to determine your wins and losses via the accrual accounting method, which is only for companies. All individuals are under the cash accounting method. Your W2 is always the same as your last paystub that you recieved during the year.... you only pay taxes on stocks and investments when you actually sell them etc.... Same could be argued for online poker winnings, whatever you actually deposited into poker would be your basis for your investment, and whatever you actually recieve from them in your bank account would be the return on your investment. You wouldnt claim $5000 you won on the roulette table and then take a loss of $3000 on the blackjack table on the same casino trip, you would just claim you make $2000 on your trip. Same theory would apply to online poker, you deposit $1000 and cash out $3000, you would claim gambling income of $2000, no matter what you actually have tied up in your poker account, the win is not realized because the money is still at risk.
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Old 09-29-2011, 02:33 AM   #47
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Re: Risky sites, the casualty loss, and possible implications for *future* play post-Black Frid

Quote:
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I am an accountant, if you have claimed all of your poker income, yes you can claim the lost money as a casualty loss when you are certain the money is lost. Also you would not claim any winnings until you have collected the money in your possession. You could argue and have a good chance of winning the argument in tax court that until the money hits your US bank account that your winnings would not have to be claimed until then. If you were playing on new years eve, you would have to check your balance at exactly 11:59.59 to determine your wins and losses via the accrual accounting method, which is only for companies. All individuals are under the cash accounting method. Your W2 is always the same as your last paystub that you recieved during the year.... you only pay taxes on stocks and investments when you actually sell them etc.... Same could be argued for online poker winnings, whatever you actually deposited into poker would be your basis for your investment, and whatever you actually recieve from them in your bank account would be the return on your investment. You wouldnt claim $5000 you won on the roulette table and then take a loss of $3000 on the blackjack table on the same casino trip, you would just claim you make $2000 on your trip. Same theory would apply to online poker, you deposit $1000 and cash out $3000, you would claim gambling income of $2000, no matter what you actually have tied up in your poker account, the win is not realized because the money is still at risk.
This makes a lot of sense to me. Couldn't it be argued that until you get the money in your bank account the money is still in play? It's just like one really really long session. I think the mistake is in looking at poker site deposits as if they were bank deposits. In reality a poker site deposit shouldn't really be considered to be equivalent to cash in this environment.
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Old 09-29-2011, 11:41 AM   #48
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Re: Risky sites, the casualty loss, and possible implications for *future* play post-Black Frid

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I am an accountant, if you have claimed all of your poker income, yes you can claim the lost money as a casualty loss when you are certain the money is lost. Also you would not claim any winnings until you have collected the money in your possession. You could argue and have a good chance of winning the argument in tax court that until the money hits your US bank account that your winnings would not have to be claimed until then. If you were playing on new years eve, you would have to check your balance at exactly 11:59.59 to determine your wins and losses via the accrual accounting method, which is only for companies. All individuals are under the cash accounting method. Your W2 is always the same as your last paystub that you recieved during the year.... you only pay taxes on stocks and investments when you actually sell them etc.... Same could be argued for online poker winnings, whatever you actually deposited into poker would be your basis for your investment, and whatever you actually recieve from them in your bank account would be the return on your investment. You wouldnt claim $5000 you won on the roulette table and then take a loss of $3000 on the blackjack table on the same casino trip, you would just claim you make $2000 on your trip. Same theory would apply to online poker, you deposit $1000 and cash out $3000, you would claim gambling income of $2000, no matter what you actually have tied up in your poker account, the win is not realized because the money is still at risk.
This is completely counter to every professional opinion I've ever encountered. People would love to do cash-based accounting with online poker (and then they could structure their cashouts so as to pay a lot less tax...) but, from the information I've helped to aggregate and collect from various sources, the IRS' notions of constructive receipt as applied to online poker are clear and unarguable.

And in your casino example, you absolutely would claim the +$5k roulette and the -$3k blackjack. The guidelines for gambling winnings and losses (for non-professionals) are very clear that different games always constitute different sessions.
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Old 09-30-2011, 04:25 PM   #49
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Re: Risky sites, the casualty loss, and possible implications for *future* play post-Black Frid

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This is completely counter to every professional opinion I've ever encountered. People would love to do cash-based accounting with online poker (and then they could structure their cashouts so as to pay a lot less tax...) but, from the information I've helped to aggregate and collect from various sources, the IRS' notions of constructive receipt as applied to online poker are clear and unarguable.
Wasn't that back when we thought the money in our accounts was backed up by actual cash?
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Old 10-01-2011, 10:30 AM   #50
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Re: Risky sites, the casualty loss, and possible implications for *future* play post-Black Frid

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Wasn't that back when we thought the money in our accounts was backed up by actual cash?
Yeah, for sure, there are definitely arguments that, looking back, constructive receipt did not apply in the case of Full Tilt Poker, particularly after the amendments to the charges last week. But it doesn't seem clean and simple.

Certainly memberly's statement that "Also you would not claim any winnings until you have collected the money in your possession" was not right -- we had no idea of this insolvency for our 2010 taxes, and it would have been 100% wrong to have elected some sort of disallowed cash method of accounting. Now, if Full Tilt Poker reopened as Full Tilt Ponzi Poker and made its accounting practices clear, and we decided to play there going forward, then I think there would be a pretty sound basis for some sort of cash-based accounting. But an entity like this would be a brand new thing in the world of gambling taxes, and might require some sort of official guidance or approval by the IRS or something, and I have no idea how that process would work.

I would agree that, logically, if authorities can pinpoint the date at which Full Tilt Poker began running its accounting shortfall, all activity after then should have been counted through some sort of cash accounting method due to lack of constructed receipt.

The issues would be that logic doesn't always coincide with IRS policy, and even if it does, retroactively changing accounting methods, especially going back into having to amend 2010 taxes, is at best a huge mess and at worst somehow not at all possible.
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