WSOP: Bubbling better than a weak cash?

[henrikrh]

If you bust out as the last person before hte money Harrah's buys you into next year's event for free ($0 profit, break-even expected value) If you cash just barely in the money you get 12.5k. I recently found out that gambling earnings in the US are taxed almost %40, therefore 12.5k is becomes less than break even.

If you have an extreme short-stack near the bubble and you can either check/fold and someone will likely bust before your big blind, or go all in and have a chance ot double and a chance to get a free entry next year. Could it be more +ev to go all in than to wait for the money?

[jackblack73]

[ QUOTE ]
If you bust out as the last person before hte money Harrah's buys you into next year's event for free ($0 profit, break-even expected value) If you cash just barely in the money you get 12.5k. I recently found out that gambling earnings in the US are taxed almost %40, therefore 12.5k is becomes less than break even.

If you have an extreme short-stack near the bubble and you can either check/fold and someone will likely bust before your big blind, or go all in and have a chance ot double and a chance to get a free entry next year. Could it be more +ev to go all in than to wait for the money?

[/ QUOTE ]
Gambling winnings aren't all taxed at near 40%. It's only 40% if you're in the that tax bracket. Furthermore, I'm guessing you'd be taxed on the $10,000 buy in from Harrah's also.

[ QUOTE ]
Furthermore, I'm guessing you'd be taxed on the $10,000 buy in from Harrah's also.

[/ QUOTE ]

Correct. Anything you recieve, of value, is taxed at the "face" value. Even if you sold your entry fee for less than 10k, you'd be taxed on the 10k.

[Greg (FossilMan)]

I net my tournaments, both now as a pro, and years ago when I filed as an amateur. When I buy in for 10K and win 12.5K, I put down +2.5K on my books. As such, cashing would mean I win 2.5K, and pay taxes on it as income. Thus, I might end up with a net of anywhere from +1.3K to +2.3K, depending upon my other income, and the rate at which my total income is taxed.

If I bubbled, and was given a free entry to next year's event, I would put that down as a 10K loss, as I'm out of pocket 10K, and the item of value I was given has no value until the event takes place next year. If the entry is non-transferable, then I have no possession of it until they sign me up next year, so I think it is perfectly proper to treat it as valueless this year. Of course, next year, should I cash in the event, my entry fee would have to be considered $0. Thus, a 12.5K win would require me to pay taxes on 12.5K, not on just 2.5K.

Later, Greg Raymer (FossilMan)

[sixtwo]

what if you won the 12.5k but previously lost in the 5k tourney. do you still report 2.5k on your taxes even though you had lost 5k

[ QUOTE ]
what if you won the 12.5k but previously lost in the 5k tourney. do you still report 2.5k on your taxes even though you had lost 5k

[/ QUOTE ]

Now you're in the area that's been already talked about - your income bracket, allowable deductions, etc. There's no blanket answer.

[MichaelOar]

Isn't the seat "constructively" received in the year that you win it? Also, I am just about positive that you only have to pay taxes on the fair market value of the seat if you sell it, not the "face" value of the seat.

Damn, I'm not looking forward to my federal income tax exam in two weeks!

Mike

[ QUOTE ]

If I bubbled, and was given a free entry to next year's event, I would put that down as a 10K loss, as I'm out of pocket 10K, and the item of value I was given has no value until the event takes place next year. If the entry is non-transferable, then I have no possession of it until they sign me up next year, so I think it is perfectly proper to treat it as valueless this year. Of course, next year, should I cash in the event, my entry fee would have to be considered $0. Thus, a 12.5K win would require me to pay taxes on 12.5K, not on just 2.5K.

Later, Greg Raymer (FossilMan)

[/ QUOTE ]
Have you verified this with a tax professional? I am studying tax in school and checked my notes and I cannot find a clear yes or no answer in regards to this being acceptable to the IRS. Based on what I have learned the 10k entry to next years event would be taxable in the year it was received for the average cash basis taxpayer. However, you have an interesting defense by claiming the entry fee has no value until the tournament starts, so I am not sure what the correct answer is.

[ QUOTE ]

Damn, I'm not looking forward to my federal income tax exam in two weeks!

Mike

[/ QUOTE ]No kidding

[2+2 wannabe]

[ QUOTE ]
Isn't the seat "constructively" received in the year that you win it?

[/ QUOTE ]

using the "accrual method" of accounting, yes it is

[ QUOTE ]
Have you verified this with a tax professional?

[/ QUOTE ]

Isn't Raymer and accountant? Or was? That doesn't necessarily mean he's an expert with taxes, but it would give him insight, and since he's got first hand experience with a few dollars won/lost, I'm not sure I'd question him. IMO, of course.

How about if you qualified in a satellite? If it was something like a $39 on Stars, getting $7,500 after taxes would be a nice payout. Even a $1k satellite at the Rio would net you a $6,500 profit. I'd take the money in that case rather than the seat and risk getting nothing.

[SoftcoreRevolt]

You are thinking of Moneymaker. Greg Raymer was a pimp in his pre poker life.

[broiler]

There was a thread about this very topic last year at tax time and my professional opinion at the time was that Greg is correct because the seat is non-transferable and therefore has no value until the seat is used. The fact that the seat is non-transferable is the key to keeping the seat from being taxable. The theory is that if Greg, for whatever reason, is unable to attend the event, he received nothing of value and would not receive the value of the seat for missing the event.

A satellite won on the internet is usually transferable and would be taxable when you win because the seat has a cash value at the minute you win. Any option that creates a value for the seat would make the win immediately taxable.

Another poster called the IRS to verify my opinion of the taxability of satellite wins and, after an hour on the phone waiting to find someone that could answer the question, was given the same answer that I laid out above,

Sir, you're new, so I'll cut you some slack. NEVER, NEVER, NEVER doubt the FossilMan. Are you not aware that he is an excellent poker player? Did you not see the 2004 WSOP ME? Did he not make over $300k this year? The man is to be regarded as a deity. I wear his glasses at my home games. In all seriousness, though, he's played in many tournaments, so, I wouldn't doubt he knows what he's talking about. He didn't just come out of nowhere and win the ME, he's been playing for a while.

[ QUOTE ]
You are thinking of Moneymaker. Greg Raymer was a pimp in his pre poker life.

[/ QUOTE ]
No, I believe he sold AmWay. Ha Ha Ha.
Actually, I believe he worked as a patent attorney. Greg, give me a call, we'll do lunch.

[ QUOTE ]
There was a thread about this very topic last year at tax time and my professional opinion at the time was that Greg is correct because the seat is non-transferable and therefore has no value until the seat is used. The fact that the seat is non-transferable is the key to keeping the seat from being taxable. The theory is that if Greg, for whatever reason, is unable to attend the event, he received nothing of value and would not receive the value of the seat for missing the event.

A satellite won on the internet is usually transferable and would be taxable when you win because the seat has a cash value at the minute you win. Any option that creates a value for the seat would make the win immediately taxable.

Another poster called the IRS to verify my opinion of the taxability of satellite wins and, after an hour on the phone waiting to find someone that could answer the question, was given the same answer that I laid out above,

[/ QUOTE ]OK that makes sense. Thanks for the explanation.

[SUfan5]

If the satellite is non-transferable such as a PPM cruise, how would the tax situation work with that?

[Shoe]

Almost every satellite i know of online is non-transferrable (for your first win).

For example, what if you win a Stars PCA seat? Obviously, the 1k cash you get is taxable immediately, but when would the free hotel room be taxable? Now or next year, and how do you determine the value of it?

I would think that since the seat is non-transferrable, the same rules would apply -- not taxable unless you cash in the tournament. Or would you need to claim the seat as a loss next year? And if you claim it as a win this year, could you even claim it as a loss next year since the win/loss took place in seperate years?

Unfortunately, this won't be an issue for me as I don't think i'm going to try for this tourney.

[broiler]

The gain or loss would be determined at the time of the tournament, unless you received cash before the time of the tournament. The situation would work exactly the same as described for the WSOP seat.

[broiler]

When I was talking about most online satellites being transferable, I was thinking about the satellites to larger online tournaments that run on a weekly basis.

You are right that the same rules would apply to an event like the PCA. The hotel room would be the same as the tournament since you would get no benefit from the room if you stayed at home. Stars would probably tell you the cost of the room, but for other sites it might be more difficult. The hotel could probably tell you the cost of the room or most hotels will post the room rate inside the room. I would prefer to check with the hotel on what the room charge was because it is likely that the online site is not paying full retail for your room.

The win and loss should be matched to the time when the entire process is complete. Nothing is complete until you are out of the tournament.