General Question About Staking
Join Date: May 2004
Posts: 2,446
I'd post this in the staking forums, but I don't have access.
Let's say you are playing the WSOP ME with 20% of your own action and 80% sold to investors at no mark up. You run deep and cash for $100k.
You "won" 100k, with 80k owed to investors and 20k into your own pocket. However, surely a win this big will be taxed? If Uncle Sam owns something like 35% of that 100k then you're left with about 65k in actual return.
Would the amount owed to backers be 80% of 65k or 80% of 100k?
In other words, how do payouts in staking situations account for taxes?
Join Date: Apr 2017
Posts: 500
I doubt anyone would take 80% anyone's action, moral hazard.
Taxes should be agreed upon before entering into the contract though, if something like that happens and anyone is butthurt, it's their fault for not doing research.
Join Date: Oct 2010
Posts: 3,896
Tax is just like a post-rake, so it should absolutely not be the horse's duty to pay it beyond your own action.
Join Date: Oct 2013
Posts: 3,709
You would explain the tax situation before having people invest in you , I can easily see trouble come up if someone from a tax-free gambling country invests in you and is ignorant and suddenly gets 65% of what he expects returned.
Join Date: May 2018
Posts: 159
Assuming horse and backer are American, generally there are two options: (a) withhold a pre-determined % of tax from the backer's share (b) send backer w-9 to collect relevant info (i.e. SSN) and issue backer a 1099-misc
Using your example,
Case (a): if predetermined % is tax bracket (i.e.35%), backer gets 65% of 80k, you get 20k and 35% of 80k; you pay 35% of 100k in tax
Case (b): backer gets 80k and pays tax on the 80k according to their tax bracket; you get 20k and pay tax on the 20k according to your tax bracket
