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Taxpayer Not Required to Comply with FBAR Reporting for Online Poker Gambling Accounts

ax News, Journals and Newsletters > Federal Tax > Federal Tax Day – Current > JUDICIARY > J.3, Taxpayer Not Required to Comply with FBAR Reporting for Online Poker Gambling Accounts (Hom, CA-9), (Jul. 29, 2016)

A poker player’s accounts at two online poker websites were not foreign financial accounts for purposes of the Foreign Account Tax Compliance Act (FATCA). However, his account with an entity that engaged in money transmissions was a foreign financial account because the entity was located in and regulated by the United Kingdom.

Comment: The taxpayer, an avid online gambler, maintained accounts containing more than $10,000 with each of two online poker websites. He maintained a third account, also containing more than $10,000, through another entity to transfer money into and out of his poker accounts. The court determined that the funds in the two poker accounts were used to facilitate playing online poker, as the poker games required that the taxpayer have a certain balance in his account before he was granted entry to a game and there was no evidence that the poker accounts served any other financial purpose for the taxpayer.

Although the individual could carry a balance in his online poker accounts, the funds were used only to play poker and there was no evidence that the accounts served any other financial purpose. Moreover, contrary to the government’s contention, the online poker accounts were not “bank” accounts. The dictionary definition of a bank is “an establishment for the custody, loan, exchange or issue of money, for the extension of credit and for facilitating the transmission of funds” and there was no evidence that the online poker accounts were established for any of those purposes.

Unpublished opinion, affirming part and reversing and remanding in part a DC Calif. decision, 2014-1 USTC ¶50,307.

J.C. Hom, CA-9, 2016-2 USTC ¶50,358

Other References:

31 U.S.C. 5311-5330

CCH Reference – 2016FED ¶36,555.027

CCH Reference – 2016FED ¶36,555.33

Tax Research Consultant

CCH Reference – TRC FILEBUS: 9,104

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