Recent Tax Decision - Poker as a Business vs Hobby
Looks like this guy was trying to deduct his poker losses as a business loss. I guess one of the reasons the tax authorities do not pursue full-time poker players to be taxed on their winnings as there are a lot more people with poker losses that may try to deduct them:
DOCNUM 2007-0238601E5
SUBJECT Taxation of a Person's Gambling Activities
SECTION 9, SECTION 40(2)(f), SECTION 3
PRINCIPAL ISSUES: Income tax treatment of an individual's on-line poker earnings/losses.
POSITION: Question of fact. However, it appears that these gambling activities are undertaken more for personal pleasure and would not constitute business activities carried on by the individual.
REASONS: The law.
2007-023860
January 23, 2008
Dear XXXXXXXXXX :
Re: Taxation of Gambling Activities
This is in reply to your electronic correspondence dated June 3, 2007 concerning whether income and losses from your gambling activities as described in your correspondence constitute income or losses from the carrying on of a business.
Our Comments
The determination of whether a person's gambling activities constitute the carrying on of a business in the pursuit of profit that results in a source of income under the Income Tax Act (the "Act") is a question of fact that can only be determined by an examination of all the circumstances and the taxpayer's entire course of conduct. In this regard, we refer you to the Canada Revenue Agency's ("CRA") general comments contained in paragraphs 10 and 11 of Interpretation Bulletin IT-334R2 Miscellaneous Receipts under the headings "Gambling Profits" and "Hobbies", respectively.
Paragraph 10 of Interpretation Bulletin IT-334R2 lists some of the factors that may be of assistance for making such a factual determination as follows:
"(a) the degree of organization that is present in the pursuit of this activity by the taxpayer,
(b) the existence of special knowledge or inside information that enables the taxpayer to reduce the element of chance,
(c) the taxpayer's intention to gamble for pleasure as compared with any intention to gamble for profit as a means of gaining a livelihood, and
(d) the extent of the taxpayer's gambling activities, including the number and frequency of bets.
Based on the limited facts described in your correspondence, your gambling activities appear to be conducted primarily for your pleasure as a hobby and without special knowledge. In such circumstances, and as noted above, earning or losses from such gambling activities would be of a personal nature and would not constitute earnings or losses of a business.
We trust the above comments are of assistance.
Yours truly,
Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
DOCNUM 2007-0238601E5
SUBJECT Taxation of a Person's Gambling Activities
SECTION 9, SECTION 40(2)(f), SECTION 3
PRINCIPAL ISSUES: Income tax treatment of an individual's on-line poker earnings/losses.
POSITION: Question of fact. However, it appears that these gambling activities are undertaken more for personal pleasure and would not constitute business activities carried on by the individual.
REASONS: The law.
2007-023860
January 23, 2008
Dear XXXXXXXXXX :
Re: Taxation of Gambling Activities
This is in reply to your electronic correspondence dated June 3, 2007 concerning whether income and losses from your gambling activities as described in your correspondence constitute income or losses from the carrying on of a business.
Our Comments
The determination of whether a person's gambling activities constitute the carrying on of a business in the pursuit of profit that results in a source of income under the Income Tax Act (the "Act") is a question of fact that can only be determined by an examination of all the circumstances and the taxpayer's entire course of conduct. In this regard, we refer you to the Canada Revenue Agency's ("CRA") general comments contained in paragraphs 10 and 11 of Interpretation Bulletin IT-334R2 Miscellaneous Receipts under the headings "Gambling Profits" and "Hobbies", respectively.
Paragraph 10 of Interpretation Bulletin IT-334R2 lists some of the factors that may be of assistance for making such a factual determination as follows:
"(a) the degree of organization that is present in the pursuit of this activity by the taxpayer,
(b) the existence of special knowledge or inside information that enables the taxpayer to reduce the element of chance,
(c) the taxpayer's intention to gamble for pleasure as compared with any intention to gamble for profit as a means of gaining a livelihood, and
(d) the extent of the taxpayer's gambling activities, including the number and frequency of bets.
Based on the limited facts described in your correspondence, your gambling activities appear to be conducted primarily for your pleasure as a hobby and without special knowledge. In such circumstances, and as noted above, earning or losses from such gambling activities would be of a personal nature and would not constitute earnings or losses of a business.
We trust the above comments are of assistance.
Yours truly,
Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
Comments
As is typical of our elected masters, they will give you one answer when it suits there purpose, and another diametrically opposed opinon when that purpose changes. Minarchy NOW !!!