Hypothetical: Reducing gambling winnings by \"losing\"?
 

A what-if question, say you've won $150k this year. And are in a very high tax bracket. Your brother needs some money, say, $100k. I picked $100k cause there is a $11k gift exclusion, and I want a taxable gift for this example (talking about US tax laws here).

If you give it to him as a gift, you'd have to first pay tax on the $150k you've won, say 40%, so you'll left with $90k. Then you give your brother $100k, and he has to pay gift tax, so overall, the end result from your gambling and the gift is:

You: -$10k (+$90k from gambling - $100 to brother)
Brother: +$100k minus gift tax (with exclusion on first $11k)

Instead, if you play some heads-up poker with your brother, and "lose" $100k to him, the situation would be different, you'd be taxed on winning $50k at 40%, and be left with $30k. End result is MUCH better for you:

You: $30k ($50k poker winnings - $20k in taxes)
Brother: $100k minus his tax rate

I'm sure there's other situations like this where it's desirable in a tax perspective to "lose" gambling to another. Is this ethical? Legal? Not that I'm going to do this, just something I'm wondering, I wish I had the "problem" of winning $150k. [img]/images/graemlins/grin.gif[/img]

- Tony

Re: Hypothetical: Reducing gambling winnings by \"losing\"?
 

I'll just call you SCUM......................hypothetical of course.


Looks like chip dumping to me, no HYPOTHETICAL about it.

My response stands, given you post

Husker

Re: Hypothetical: Reducing gambling winnings by \"losing\"?
 

Ethical? Of course. The government is out to take away your hard earned money by force, and then use your money to take away your drugs by force. F*ck them. The U.S.A. was founded on the principle of tax rebellion.

Legal? No. This is clearly a scheme. IRS agents look for this sort of thing, and trying this increases your audit risk.

Re: Hypothetical: Reducing gambling winnings by \"losing\"?
 

Just move to a tax free country.

Re: Hypothetical: Reducing gambling winnings by \"losing\"?
 

The gift tax is owed by the giver. It is actually part of a combined gift/estate tax (as if your estate is prepaying for the distribution of your assets upon death).

There is a $1.5 million dollar lifetime exclusion, so even though you will have to file the tax return if you go over the gift limit - you will not pay any tax until you reach this level.

If your brother is married, you can give a seperate strings-free gift of $11,000 to his wife. Bill Gates could give his entire fortune away tax free if he gave enough $11,000 or less gifts to a lot of people [img]/images/graemlins/grin.gif[/img]

ps - As a US citizen, moving to a tax-free country will not work.

Re: Hypothetical: Reducing gambling winnings by \"losing\"?
 

People have had their account barred and money seized by Poker sites for dumping 1/10th of that amount.

Re: Hypothetical: Reducing gambling winnings by \"losing\"?
 

[ QUOTE ]
People have had their account barred and money seized by Poker sites for dumping 1/10th of that amount.

[/ QUOTE ]

Why do they need to do it on a poker site?

Anyway can't you do something creative, like "lend" him the 100K, with 11K annual payments, and then gift him the 11K each year?

Re: Hypothetical: Reducing gambling winnings by \"losing\"?
 

[ QUOTE ]
Why do they need to do it on a poker site?

[/ QUOTE ]

I'm assuming that since this is posted in "Internet Gambling" that is where he's going to do it.

I suppose you can do it at a B&M casino, but I don't think they appreciate collusion and chip dumping either.

Or you can play it heads-up on your kitchen table, but then why bother, just give him the money straight up. The IRS is never going to believe it anyway.

Re: Hypothetical: Reducing gambling winnings by \"losing\"?
 

Why hypothetically bother?

Hypothetically telephone Pacific and ask what they could hypothetically do for you.

Re: Hypothetical: Reducing gambling winnings by \"losing\"?
 

Looks like chip dumping to me

where did he say anything about this game being online? i read it as a game that never really was going to happen, just information to be used in an audit if it comes up. as i read his post, i imagined him telling them it was at their kitchen table. i see no inference to online play.

what am i missing?

tony, to answer the questions you asked.

1. is it legal? in many states home poker is legal

2. is it ethical? that's a personal call. MANY that would say "no tony, that's not ethical", are the same ones that would never report it at all unless they got a w2-G

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