Taxes & corporations

[cardcounter0]

You are correct. If you were to set up servers and start running and operating an online gambling system, most U.S. States would not be the place to do it.

However, if you sign on to an offshore gambling system, you are not violating most State Laws. The laws are aimed at the operators, not the players.

There is already prior Federal case law that says the actual gambling takes place where the servers are located.

[astroglide]

participation is expressly forbidden all over. it is illegal to place bets at unsanctioned locations. it is illegal to play, the penalties are just worse for hosting/bookkeeping/aiding and abetting (which being an affiliate actually falls under).

[astroglide]

However, if you sign on to an offshore gambling system, you are not violating most State Laws. The laws are aimed at the operators, not the players.

wrong. the laws prohibit people from placing bets, not just taking them. pick a state at random and look at the statutes.

There is already prior Federal case law that says the actual gambling takes place where the servers are located.

Here's an interesting US legal development - a story from the States on an online gambler who has been successfully prosecuted.

ForumComm.com reports that a former Harwood, North Dakota man who pleaded guilty this week in Cass County District Court to placing sports bets over the Internet is believed to be the first person in the United States to be convicted of the crime.

Jeffrey Trauman, a former car salesman who began betting full time three years ago, authorized Fargo attorney John Goff to plead guilty to a misdemeanor gambling charge. Trauman now lives with his wife and three children in Kentucky, where he can legally continue his betting career, Goff said.

Though about half the states still have laws against gambling, only a handful of people have been convicted solely for placing bets, said I. Nelson Rose, a professor at Whittier Law School in California, who has studied gambling law for 23 years.

“He is the first and only person I know of who has actually both been arrested and convicted for online gambling,” said Rose, whom Trauman e-mailed for advice.

Following a joint recommendation by Goff and a state prosecutor, East Central Judicial District Judge Norman Backes gave Trauman a one-year deferred sentence and a mandatory $500 fine.

Although Trauman declared his winnings for tax purposes, a state investigation initiated by the attorney general’s office began looking into his betting affairs this spring. When agents searched his home in April, they found $43,000 in cash in a basement office. But Trauman said he did not know what he was doing was illegal and pointed out that he had declared his winnings to the tax authorities, a report by Gaming Division Auditor Greg Schlosser said.

A spokeswoman for Schlosser said a tip from an outside source led to the investigation but would not be more specific. Any further details might jeopardize future cases, she said.

Though Trauman listed professional gambler as his job on tax returns, Rose said it is highly unlikely that IRS agents tipped off investigators. U.S. Supreme Court rulings against self-incrimination restrict such collaboration.

these are the facts, guys. however low the risk is, it is breaking the law. the penalty varies, from what i've seen most states consider first offenses a misdemeanor but some do it based on the amount or the intent of the wager. the present interpretation of the law (a lot of which is inferred from the federal wire act) is that if you offer unsanctioned gambling you're in big trouble, if you help it you're in big trouble, and if you place bets you're in less trouble.

[cardcounter0]

In the State I reside in, betting on dog races is illegal.
If I travel to a neighboring State, and bet at the dog tracks, am I violating my State Law? Sorry, but no.

Since it has been held that the actual gambling and placing of bets takes place where the server is located, if I play poker on a server located outside my State, I am not breaking the law -- unless State law specifically prohibts this activity.

The Case you quote is unique. It involves SPORTS BETTING. The mere transmission of SPORTS BET information is a violation of the Federal Wire Act. Sports Bets are unique, as opposed to playing poker.

So how do you explain the following in your story:
"Trauman now lives with his wife and three children in Kentucky, where he can legally continue his betting career, Goff said."

Gee, I thought gambling was illegal everywhere? I don't know of any legal sports books in Kentucky.
[img]/images/graemlins/confused.gif[/img] [img]/images/graemlins/confused.gif[/img] [img]/images/graemlins/confused.gif[/img]

[astroglide]

he was prosecuted by north dakota, not by the federal government. could you read and research just a little before wasting everybody's time with a response? i'm tired of explaining this stuff to people who are just going to believe what they want to believe in light of clear and objective evidence. here are the kentucky penalties:

528.020 Promoting gambling in the first degree.

(1) A person is guilty of promoting gambling in the first degree when he knowingly advances or profits from unlawful gambling activity by:
(a) Engaging in bookmaking to the extent that he employs or utilizes three or more
persons in a bookmaking activity and receives or accepts in any one day bets
totaling more than $500; or
(b) Receiving in connection with a lottery or mutuel scheme or enterprise:
1. Money or written records from a person other than a player whose chances
or plays are represented by such money or records; or
2. More than $500 in any one day of money played in the scheme or enterprise; or
(c) Setting up and operating a gambling device.
(2) Promoting gambling in the first degree is a Class D felony.

528.030 Promoting gambling in the second degree.

(1) A person is guilty of promoting gambling in the second degree when he knowingly advances or profits from unlawful gambling activity.
(2) Promoting gambling in the second degree is a Class A misdemeanor.

528.040 Conspiracy to promote gambling.

(1) A person is guilty of conspiracy to promote gambling when he conspires to advance or profit from gambling activity.
(2) "Conspire" means to engage in activity constituting a criminal conspiracy as defined in KRS 506.040.
(3) Conspiracy to promote gambling is a Class D felony.

do you see anywhere that it is stated that PLACING bets is illegal there? they have definitions for what makes a gambler in the state, but there are no penalties outlined for it, only for people offering/taking bets. kentucky is 'the place to be' in that respect as compared to almost everywhere in the united states. quoting the webmaster of gambling-law-us.com in an email he sent me:

"If you just want to move then go to Kentucky. That's where the last guy convicted of illegal online gambling, specifically sports betting, under North Dakota law went so that he could continue to make online sports bets without violating the law. Lexington is a great place. Home of the original "dueling pianos" if I recall correctly.

Call me if you like.

Regards,
Chuck Humphrey"

some states have misdemeanors and such for first offenses so it shouldn't be worth the hassle to move for that reason.

[cardcounter0]

From your previous posts:

"internet gambling is illegal all over the usa too. neat huh?"

"per state law, online gambling is illegal virtually everywhere in the usa"

"participation is expressly forbidden all over. it is illegal to place bets at unsanctioned locations."

And this is all based on a single prosecution in North Friggin' Dakota?

Some States don't have laws that address internet gambling --- and those that do, are mostly like Kentucky -- which address the OPERATION of gambling, not the participation.

There are 50,000 players on Party Poker every day. There has been 1 gambler prosecuted by 1 State. I think playing poker online (not operating or bookmaking or sports betting) is still a +EV play.

Not paying the IRS your Federal Taxes on your poker play would be a -EV play.

[astroglide]

no, it's based on the statutes which i have referenced. look for yourself, i'm not going to waste my time on it. a state does not need to address internet gambling for it to be illegal, they only need to ban gambling, and most states have done that. they start by banning all gambling, and they they unban sanctioned casinos. unless they unban online poker, it is illegal because it is gambling. as i already stated, i still play poker online. i am presenting complete facts with references, and they cannot be debated. whatever you do knowing these facts is your choice.

i would also think that there are many more illegal sports betters than poker players. i can't know how popular it is to gamble online specifically though.

my position is that everybody should file their taxes legally, and then consult their state's statutes to determine how they feel about the legal aspects of it.

[James282]

What's the maximum penalty you've come across, astroglide?
-James

[Cerril]

Definitely depends on where you are. California at least is a nice place to gamble, online or off. Provided, at least, that it's poker or a similar card game (and why would we care about games of pure chance online anyway!)

[BIGRED]

[ QUOTE ]

Self employment tax is 15.3%. With the corperation, all earnings are corperate earnings and are not subject to self employment taxes. But you work for the corperation so
you half to pay yourself a "reasonable" salary. That salary is the the only part of your income subject to selfemployment taxes. The rest of the money comes from corperate divideds and are taxed as dividends. So, say you make $30000 and pay yourself a salary of $833 per month, $10000 per year. So the savings from having the corperation is $20000 x 15.3%= $3060. Say you make $60000 and pay yourself $15000. Then you would save $45000 x 15.3%= $6885. I think devidend income is also taxed at a lower rate, but I'm not sure on that. I haven't done my own taxes in 6 years. My accountant understands it though. It did cost $750 to set up the corp, and about $550 a year after that to the accountant for record keeping and tax prep, so it's not all savings, but still a good deal.


[/ QUOTE ]

I'm digging up an old thread. I'm not sure if anyone will repsond, but I'll try. If anyone is familiar with S-Corp, I would appreciate a response. I have two questions.

Question 1:

In the above quote, where the poster mentions "self employment tax", doesn't he mean "social security tax"? If you set up a corporation for your poker venture and you get paid a salary from it, you are not self employed. Rather, you are employed by the corporation. So, he means to say that you save on social security tax, not self employment tax, since social security tax is applied only to the salary. Am I correct?

Question 2:

In an S corp, there's the personal income for you, and the corporate income. After all taxes are paid, can I legally use the corporation's money for my personal use?