Online Balances-- Asset?

[Gotmilk]

When I prepare my taxes, what do you guys think? Should online balances be considered a wager or an asset? If it should be an asset, what if I put my whole bankroll on the table New Year's Eve so it actually is chips in play and not money in account? Taxes will be fun.

[Izaak_Walton]

I don't understand being taxed on assets?????

[xxx]

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I don't understand being taxed on assets?????

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In the US, some states (such a Michigan) have a tax on all assets as well as income. Some states (such as New Jersey) have a tax on income. Some states (such as Nevada) don't have a tax.

[JellyFishy]

You don't pay tax on capital, only on capital gains, that is increase in asset value when you sold and didn't buy back within like 28days? Varies with every country.

You get tax on income, you don't get tax relief from gambling losses unless you can prove that the lost occurred due to operating a gambling business which is possibly illegal in your place without a licence.

So you need to pay tax on your winnings if you declare them. They don't care if you lost it or not.

Unless you are non-US citizen and non-resident, I think US- guys are taxable worldwide I am not sure since I am not US guy but I have US companies.

It is easy not to pay any tax legally in your situation but quite complicated to implement the scheme so I'll leave it out.

I only typed this out cause not much to do while waiting for friend to transfer me $200 to HUGEFISH2888@epassporte.com for hookers in Thailand. Only got Epassporte visa with me which is running out of hooker cash and Partypoker barred cashier access from Thailand!!!

[Rushmore]

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You get tax on income, you don't get tax relief from gambling losses unless you can prove that the lost occurred due to operating a gambling business which is possibly illegal in your place without a licence.

So you need to pay tax on your winnings if you declare them. They don't care if you lost it or not.

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My accountant assures me this absolutely untrue, so long as you claim that you are a professional. He says it is indisputable that you may claim losses up to the amount of your winnings.

I am hoping he is right.

Based upon what Jelly posted, one could have earnings of $200K for the year, losses of $100K, and need to pay tax on $200K. This cannot be right, particularly if one's primary source of income is poker.

[Rockatansky]

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You get tax on income, you don't get tax relief from gambling losses unless you can prove that the lost occurred due to operating a gambling business which is possibly illegal in your place without a licence.

So you need to pay tax on your winnings if you declare them. They don't care if you lost it or not.

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My accountant assures me this absolutely untrue, so long as you claim that you are a professional. He says it is indisputable that you may claim losses up to the amount of your winnings.

I am hoping he is right.

Based upon what Jelly posted, one could have earnings of $200K for the year, losses of $100K, and need to pay tax on $200K. This cannot be right, particularly if one's primary source of income is poker.

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This is correct, except for the part about having to be a professional in order to deduct losses. Section 165(d) of the revenue code allows you to deduct gambling losses to the extent that you have gambling gains. There is no requirement that you be a professional gambler in order to do this.

There may be other benefits to having poker playing considered your "trade or business". However, anyone to whom this applies should talk to a knowledgable accountant or tax attorney to determine their best course of action.

[Rushmore]

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This is correct, except for the part about having to be a professional in order to deduct losses. Section 165(d) of the revenue code allows you to deduct gambling losses to the extent that you have gambling gains. There is no requirement that you be a professional gambler in order to do this.

There may be other benefits to having poker playing considered your "trade or business". However, anyone to whom this applies should talk to a knowledgable accountant or tax attorney to determine their best course of action.

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Looked into it a bit further. You are right, i'm happy to say. It's expenses that you may not claim unless you are professional.

My accountant tells me that one of the big drawbacks to declaring as a pro is social security, which will need to be paid. Ultimately, the question is whether or not you can offset your social security contributions with expenses. This would depend on a lot of things, obviously.

Talking to a knowledgeable tax attorney or accountant is clearly the correct thing to do, but be advised--you may hear different things from different people on this subject. It's a little tough to get a straight answer on some things (what constitutes a "session," what do you need for online documentation [Neteller account, all poker site accounts, checking accounts, and/or personal books?], are funds in poker accounts declarable gains, or do they only become so when you cash out?, etc.)

It's esoteric, even for the guys who are expected to know. There is some grey area.

Make a good faith effort, and hope not to be audited.

[Rockatansky]

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are funds in poker accounts declarable gains

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There's no question that gains from playing poker are supposed to be reported to the IRS, regardless of where the gains are presently located. As to whether the IRS will know about your gains if they're in an online poker account or in Netteller, I honestly don't know.

I know this isn't what most people want to hear. The fact is, though, that the revenue code defines income as "gains from whatever source derived," and the Supreme Court has interpreted this phrase as granting Congress the power to levy taxes to the extent that is Constitutionally permissible. This generally means that the IRS doesn't care about cute distinctions about where funds are located and won't consider the gains a "wager" because they're currently stashed in an online poker account.

I'm not trying to sound like a know-it-all, I just want people to make sure they get sound advice before assuming that they can stash large amounts poker winnings in Netteller or their poker account and not report them.

[Gotmilk]

OK, BUT then is money in your account even capital, or is it simply a wager in action? I.E. when i take money from my checking account and buy chips with them do I have an asset, or can I take a deduction as a gambling loss until I cash them back in, when it would be a gambling win?

[UncleDuke]

This isn't an expert legal opinion, but I strongly suspect you'd be expected to treat the money on account as an asset. I don't think one could reasonably describe money sitting in an account (or converted into chips redeemable for money) as having been wagered. Assuming the casino/poker room is reputable, the account or chip value is more or less equivalent to having a pile of cash with a clearly quantifiable value.