WSOP buying shares situation

[LotsOfOuts69]

I apologize if this is not the correct forum but i didnt know where to post.

Lets say you won an entry to the $10,000 main event at the WSOP. You are going to sell shares of yourself and lets say you sell off 70%. OK so now you make a great run and win $100,000, so you owe $70,000 to your backers correct? Well if I won $100,000 I have to pay at LEAST $33,000 in taxes if not more, so I cant even cover the shares I owe!

So do the people who buy shares get 70% of my post tax money? Plus, they will have to pay taxes on anything I give them, correct? So the money gets taxed twice? Not sure how you would resolve this situation, and I just wantd to hear some thoughts. Thanks!

--LoO

[gyndok]

my guess is you would pay taxes on the profit of your share.

your cost basis is 3000 and your return is 30,000 so your taxable profit is 27,000.

i am not an accountant, but this seems the best way to handle it.. Anyone with actual experience, please correct me if i am wrong.

[Ulysses]

If they get $70k and you get $30k, they pay taxes on $70k and you pay taxes on $30k.

[LotsOfOuts69]

Just wondering because technically the $100,000 would be in a check in your name, so I didnt know if you would be held responsible for the taxes on the entire $100,000.

--LoO

[Shoe]

Just make sure you document the shares you pay to everyone else. There is also a tax form you can give them along with your payment to show that you did not keep all of your tournament winnings.

[Voltron87]

WSOP pays cash.

I'm not 100% sure on how taxes on staking work, but I am sure that implicit in any staking agreement is the notion that the tax burden is shared.

Let's say I stake someone 5K in a 10K event. They cash for 100,000. I am entitled to 50K. So that person gives me 50K minus the 1/2 of the taxes on the 100K. Do I have to report the money I profit from staking in my income tax?

[david050173]

[ QUOTE ]
Just wondering because technically the $100,000 would be in a check in your name, so I didnt know if you would be held responsible for the taxes on the entire $100,000.

--LoO

[/ QUOTE ]

There are some forms you have to fill out when you pool money for gambling purposes. You can't win 100K and just claim you gave 70K away to partners. the IRS will want the info on people you paid. If those people are not US residants I am sure it becomes really complex.

[broiler]

Your net result is fine, but I would present it differently on a tax return. It also depends on if you file the form that shows how the prize was broken down with the IRS.

Assuming a recreational gambler without filing the form mentioned above, I would present it as follows as other income:

Tournament winnings 100,000
Less: amount paid to SSN:... (70,000)
Less: entry fee for tournament (3,000)

The important part is that the tournament winnings must match the W-2G that you will get for cashing in the tournament. I also suggest getting the Social Security Number for any backer since the form to split the prize also requires the number. If you put a negative 70,000 in your other income line, you are very likely to be questioned by the IRS, so having an SSN is key. They want to match the in and out of the income.

If you fill out the prize splitting form, you remove the amount to backers and replace the winnings with the $30,000 that you won.

I have never had a question that couldn't be handled by a simple letter to the IRS when presenting the information in this manner. Usually, a letter arives from the IRS because the other party has not picked up the income and they want you to provide information to support the ownership of the income in question.