Tax considerations for backers

[mhcmarty]

I have read where Raymer had a group of investors backing him for a specific period of time. And that MoneyMaker had his Dad and friend invest in his WSOP entry.

I am putting together a few WSOP event satellites where the final 5 of each satellite will have a vested interest in the results of the satellite winner. We are trying to avoid a winner take all situation.

I am trying to figure out the tax ramification should our group entries make significant prize money. The person winning the prize money would obviously be taxed, but would the people he had to pay also be taxed based as a gift tax?

Would there be a way to create a limited partnership to avoid the 2nd tax.

Would the WSOP be able to except a tax ID # from a limited partnership?

Any ideas?

[Stock Whiz]

The easiest thing to do is to record everyone's SS#. If someone did cash he would report the entire amount on his return so that it would match with the 1099.

Then, underneath the reported income he could put
"Reported by SS#xxx-xx-xxxx"
Enter this as a negative amount. It is the others responsibilty to pick their share of income on their return. This way everyone picks up their share of income. There is no gift tax consequenses. Let me know if you have any questions.

Whiz
CPA