"Foriegn Earned Income Credit NOT allowed for Pro Gamblers"

[KaneKungFu123]

"Unfortunately, being a professional gambler does not mean you have earned income. Earned income is defined (in the tax code) as wages, salaries, commissions, etc.

Professional gamblers don't have "earned income" even in the US. They do have self-employment income. Some people who have self-employment income have earned income, but the converse isn't always true.

This issue is covered under regulations issued pursuant to the Internal Revenue Code. While you could sue, the chance of success is almost non-existant. Additionally, courts have held that deductions "...are a matter of legislative grace." Gamblers don't get much grace from Congress. There are no court cases that I'm aware of (even under a pro.se. basis) because this is a settled area of tax law."

This are statements from Russ Fox, who is a respected CPA.
Sounds like he knows what he is talking about.

[ChrisMonkeymaker]

Can you use a corporation (domestic, Nevada, or offshore) to play poker? And would wins and loses belong to the corporation?

[geormiet]

This makes me sad. Thanks for the info though.

[Holden97]

What would using a corporate structure for poker activities accomplish?

[ChrisMonkeymaker]

Technically, if you play as a corporation the income will be that of the corporation not yours, because a corporation is a separate legal entity. You would only pay personal income tax on the salary that you choose to let your corporation pay you. And also on the dividends that you choose to let the corporation pay you (I don't know whether dividends are earned income or capital gains in this case). Any share of the profits that you choose to be retained by your corporation will belong to the corporation. Of course, it would have to pay taxes on the net profits AFTER EXPENSES like travel, food, equipment like computers and software, transportation, etc.

This is all explained in this book. But don't act on any of its advice without going to a CPA. Let the CPA guide you in doing things so that everything you do is perfectly legal and ethical, and customized to your own unique situation.

This assumes playing as a corporation is allowed, of course. If not,then this post is totally useless. I'm still waiting for someone (who has done it or knows someone who has done it) to tell whether this is allowed. I hope we can get a response in this thread.

[Holden97]

I agree with what you've described. With some limited exceptions, I'm not clear on how using a corporation accomplishes something different than reporting poker income (AFTER EXPENSES) on a Schedule C.

The limited exceptions I can think of would be in the context of utilizing both the individual and corporate graduated tax rates (this benefit may be offset by the double taxation on dividends) and "tax-free" dividends from an S Corporation.

There are probably other benefits, so feel free to shoot holes in my view of things
.
The other issue I wondered abut is whether legally you can play as a corporation, or are you really playing for a corporation? When I say "legally", I guess I'm wondering about specific terms and conditions for playing in certain tournaments.

[ChrisMonkeymaker]

[ QUOTE ]
The other issue I wondered abut is whether legally you can play as a corporation, or are you really playing for a corporation? When I say "legally", I guess I'm wondering about specific terms and conditions for playing in certain tournaments.

[/ QUOTE ]

I am curious about this myself. My guess is that you would be playing as some agent (employee) of the corporation and therefore for the corporation. I am still waiting for info on whether tournaments would allow this corporation arrangement. This was talked about in another thread but no one made a post on whether this is possible. Hopefully, this will change in this thread.

[Holden97]

So many tournament players have backers, what's the difference in the corporation being your backer? Corporation pays player $X to play the tournament and player returns Y% of winnings to Corporation. Case closed.

(By the way, that is a hypothesis, not a statement)

[DesertCat]

[ QUOTE ]
I agree with what you've described. With some limited exceptions, I'm not clear on how using a corporation accomplishes something different than reporting poker income (AFTER EXPENSES) on a Schedule C.


[/ QUOTE ]

Assuming it's legal to play poker within a corporation, there is one very large additional deduction provided by using a corp. structure to convert winnings to income. You should be able to shelter over $40k in pre-tax income in retirement accounts, between corporate contributions and your own. Talk to a CPA.

[Holden97]

SEP-IRA and Self-Employed 401(k) plans are available to most entity forms, including sole proprietors, and have the same contribution limits and deductibility.