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  • Tax question

    I have a question regarding winning sponsorship points.

    If you win enough sponsorsip points at PSO would there be any tax implications? I understand that there would be taxes on any winnings at the tournament but how about the buy-in. For example would you have to pay come up with approx $2500 to pay a winners tax on the sponsored $10,000 WSOP seat? (depending on your tax bracket of course) This could render it impossible to actually use the points for some folks. Any advise would be greatly appreciated. And I also understand it is just opinion and I should seek professional advise.

    Fred

  • #2
    tax question

    I'm not a tax man. :lol:

    I'll look it up on IRS.gov and post it if I find it (CUT & PASTED):

    PUBLICATION 17, YOUR INCOME TAX

    Prizes and awards. If you win a prize in a lucky number drawing, television or radio quiz program, beauty contest, or other event, you must include it in your income. For example, if you win a $50 prize in a photography contest, you must report this income on line 21 of Form 1040. If you refuse to accept a prize, do not include its value in your income.

    Prizes and awards in goods or services must be included in your income at their fair market value.

    Comment


    • #3
      Wow, I'm so incredibly glad I live in Canada. All winnings here are tax-free.

      Chris

      Comment


      • #4
        OK so taking this the next step. You win a $10,000 seat and for the sake of argument tax rate is 25%. Tax so far $2500. In the unlikely event you finish in the money and win $20,000 that's another $5000 in tax. Total is $7500 in tax on $20,000 in cash equating to a whopping 37.5% tax rate. Seems hardly worth it to me. Much more likely you will not finish in the money and have to scrap up $2500 worth of grocery money to pay the tax man.

        Is my logic flawed?

        Comment


        • #5
          If you pay $10,000 to enter and your bust out spot pays $20,000 your net gain is only $10,000.

          Since, in the USA, gambling losses are deductible to the extent of gambling winnings. If you win a $10,000 seat and don't make the money you MIGHT be able to offset the income from the prize. That's a question for a tax expert however.

          Comment


          • #6
            ev780, This is the reply that i received from diej2002'
            hope it helps' take care
            HERBY BONES


            _________
            diej2002



            Joined: 31 May 2002
            Posts: 139

            Posted: 19 Nov 2002 10:28
            Post subject:

            --------------------------------------------------------------------------------

            You would have $10,000 (remember to take out the cost of the satellite, as it is a return of capital) of gross income (the value of the seat) and 10,000 as a misc. itemized deduction (unless you are a full-time professional player, in which you would deduct $10,000 from Adjusted Gross Income.

            Comment


            • #7
              what most of you are forgetting is that poker is a game of "Skill" the taxes are not based on lucky games like slots.

              in the 70's a player who won a big tournament was stopped by an IRS agent, and asked to pay his tax on the spot. he refused ....they went to court (maybe someone can find it) and won on the basis of all the loses he had taken over the years. his attorney contended that the losses offset the winnings.

              this did happen and the player was a pretty prominent tournament player. hope one of you can find out more about it.

              Shadrak
              Time is the fire we all burn in

              Comment


              • #8
                OK...if you win the prize, say 10K in the Big One II and you bust out out of the money you will have 10K in income from the prize. However, you will also have 10K in misc. itemized deductions from gambling losses, so they will, at least partially, offset.

                There is a potential problem, however. That is that the prize may not be considered gambling winnings meaning that the 10K loss may not be deductible because gambling losses are only deductible to the extent of your gambling winnings. Another potential problem is that the prize will likely be used in the next year. In the event that I win a large, significant amount, I would likely request a private letter ruling from the IRS. This can be done through your CPA. Another avenue could be US Tax Court if you are asked to substantiate your deduction.

                Comment


                • #9
                  ok, i dont understand. as far as i know, you can not be taxed at all on your sponsorship points. you never touch actual cash!!!!!!! you never get any money, you get a buy in to a tournament, a seat!!!! being a sponsorship, it is not income that you are getting, just a ticket to play in a tournament. am i missing something?

                  Comment


                  • #10
                    Just dont tell anyone! lol

                    Comment


                    • #11
                      Actually Jmuzzey even if you don't "earn" enough to use your scholarship points for a tournament buyin in the year that you earned the sponsorship points, they are still considered earned income in the year that you win the sponsorship points.

                      You can always use your monthly membership dues to offset your income from league winnings.

                      This would be my understanding of the tax laws.

                      Comment


                      • #12
                        Blackaces, as far a living in canada, If you happen to play and win here then our goverment will get there cut. I have seen it at the casinos were they automaticly take 30% off the top of your winnings, At least that is how it was done at harrahs casino in IL. But hopefully It works different here


                        Merry Christmas

                        Comment


                        • #13
                          As far as I am concerned my business is paying for players to play in poker events. This is a marketing cost for my business and I believe that any winnings you may receive from that tournament should indeed go on your tax return as income in certain countries.

                          This is not true in every country around the world however. for example, in England you do not have to declare such winnings.

                          I do not believe that the entry fee, (paid by PokerSchool directly to the Casino) can be considered income for the member.

                          I would imagine that you WOULD NOT be able to deduct the entry fee from any winnings to offset them. The fact is that you have not paid ANY entry fee. So, in the WPO if you were to receive $7,000 prize money then I expect that you would (in certain countries, and I expect this would include the USA) be expected to declare an income of $7,000. (not a net loss of $3,000, even if you were a professional player).



                          Mark

                          Comment


                          • #14
                            Originally posted by MuzzeyJ
                            Blackaces, as far a living in canada, If you happen to play and win here then our goverment will get there cut. I have seen it at the casinos were they automaticly take 30% off the top of your winnings, At least that is how it was done at harrahs casino in IL. But hopefully It works different here
                            True, but unless it turns out to be a HUGE wad of cash that results from winning the tournament, any income I derive would likely be offset by the yearly personal income tax deduction. So, no biggie.

                            Chris

                            Comment

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