tax question

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You claim to have gotten a degree in accounting? This wasn't some mail order course, was it?

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You deposit all of your income in it for the whole year.

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You got a year's worth of income. You had constructive receipt of the funds. You had to have "unfettered control" of the funds if you were able to deposit them in the bank. You owe tax on it.

However, if you can show legitimate seizure of the funds, versus just throwing the money away, you have a deduction of the loss.

Net Taxable Income = 0. Your losses equal your winnings.

Later, if the funds are freed, tax due on 1 years worth of income the next time you are required to file.

[iceman5]

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Its not your money until all conditions are released and you can withdraw it at will. Right now, the money still belongs to the site, not you.

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This does make sense to me. The money isn't necessarily yours, it still belongs to the site because of the situation you're in. As a result I think you can get away with not claiming it. Everything is such a gray scale with filing taxes. I would just use your judgment on this one but consulting a professional is your best bet if you want to make sure you aren't liable. IMO, it is morally ridiculous to me to even consider filing money that I may not even get. I personally think it would be fine to just file that money on next year's returns instead.

However iceman, the IRS doesn't know what's in your poker account but if you are audited the IRS has the right to ask for the passwords to your poker accounts to check the balance of them. Someone on this forum was audited and refused to give the IRS their password to his accounts and he was penalized.

In this situation however, if the IRS wanted the password to your confiscated poker account they wouldn't be able to access the information they needed to anyway since you can't login yourself, right?

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Im not saying youre wrong, but this is hard for me to belive. Maybe you were mislead? What was the penalty?

The IRS cant just penalize you for not giving them your password. Thats like the police arresting you for not confessing to a crime.

If they want to try to get a subpoena for the password, let them try.

Like I said, Im not saying this is impossible. but I would have to see evidence of this happening for me to believe it. Maybe someone fibbed to you about it?

I have a feeling theres more behind this than meets the eye. How did the guy get audited in the 1st place? Did he not file a return at all and was under investigation for tax evasion?

Its not like the IRS automatically asks for your poker info when yo get audited. Not that many people even play poker online compared to the number of people who get audited, so I doubt they assume that you have a poker account just because they are auditing you.

Like Ive said before, I pay my taxes to the best of my ability, but Im not going to be bullied by the IRS either.

[Krazy Dan]

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You must be drunk.

I just deposited a million dollars in an account for you.
Whoopppss! I just froze the account. In a couple of weeks, I will put the money back into my pocket. Be sure to pay the IRS the taxes on your million you "had".
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The joke's on you. That could never be considered income by him because if anything, that would have been a gift. I suggest you look up the term "gift tax."

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I suggest you look up the terms "constructive receipt" and "unfettered control" in regards to the definition of income.

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The problem is that, before he sat at the alleged chip dumping table, he definitely had unfettered control and very probably constructive receipt, depending on an interpretation from the IRS regarding whether a poker site is a bank.

[scott2130]

Does this help?

There is constructive receipt when income is credited without restriction and made available to the taxpayer. There must be no substantial limitation or condition on the taxpayer's right to bring the funds within his control. An insubstantial forfeiture provision, a notice requirement, or the loss of bonus interest for deposits or accounts in certain financial institutions is not a substantial limitation (Reg. 1.451-2(a))

[scott2130]

Here is one you didn't think of.

Claim-of-Right Doctrine. Under an established principle of tax law, payments must be included in gross income if the taxpayrer receives them without restriction under a claim of right. This is true even though the taxpayer may discover in a later year that he had no right to the payments in the earlier year and is required to repay the same amount. Under the claim-of-right doctrine, the taxpayer may deduct the repayments in the year in which they are made.

I am to tired to think this all the way through but I am pretty sure he has to pay the tax and then take a dedution if the site keeps it. How he files is also important, form 1040 or schedule c.

Trying to put logic to the US tax code is not the way to solve a tax question.

Of course they will make their determination by the end of the year and this discussion will be mute.

[Schwartzy61]

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You claim to have gotten a degree in accounting? This wasn't some mail order course, was it?

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You deposit all of your income in it for the whole year.

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You got a year's worth of income. You had constructive receipt of the funds. You had to have "unfettered control" of the funds if you were able to deposit them in the bank. You owe tax on it.

However, if you can show legitimate seizure of the funds, versus just throwing the money away, you have a deduction of the loss.

Net Taxable Income = 0. Your losses equal your winnings.

Later, if the funds are freed, tax due on 1 years worth of income the next time you are required to file.

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As for my degree it was from a respectable Virginia University, but it's been awhile since the only tax course that was required, and even that focused more on business entities.

I think I know our divergence now. I am considering the site a sort of "bank" account. It's a money account that he had control over up until the point of suspension. So in essence he had a whole year's worth of winnings and control over those winnings until an unforeseen event. To me it comes down to what is recepit of the money in this particular case. I am using the assumption that once he wins the money and it is placed in his poker account he has received it and has the ability to withdraw it, or "unfettered control." Then he loses said control when his account is suspended. You on the other hand say he can't have recepit of the money until it is in his bank account nor has he ever had control over it because he can't withdraw it right now. Two ways to look at it and it would be hard to predict which side the IRS would lean toward. But I would think they would side with the version that has you paying the most tax, cause the IRS is cool like that...

So like I've mentioned and another poster reiterated I would fall on the safe side of paying tax on it now and if the site keeps the money on an unsubstantiated claim, or downright thievery, go ahead and use the 50k as a casualty/theft loss deduction...