Tax Law

Winning poker players face a tough decision every April—to report or not to report. If they choose not to report their poker winnings as income, they may be on the wrong side of the tax law. If they are found to be professional poker players, they will face interest and penalties in addition to the tax they would otherwise have had to pay on their net winnings. Moreover, they may forever face a higher risk of unpleasant tax audits from the CRA. On the other hand, if they report their poker winnings as income, the CRA will be happy for them to pay tax on their winnings. But by volunteering to pay, they may regard themselves as patsies. The taxation of gambling winnings is a grey area in tax law, and no self-respecting poker player wants to be a patsy.

With a recent judgment by the Federal Court in Radonjic, tax matters are now a little more certain, predictable and fair for winning poker players. Of course, Canadian gamblers have long known that generally their losses are not deductible and gains are not included in income. The grey area surrounds an idea that the courts have also embraced, which is that professional gamblers are taxable on winnings. The courts have yet to find that a poker player is a taxable professional, leaving winning players in the confounding dilemma of deciding whether to report or not to report. This is where the recent Federal Court decision in Radonjic (2013) comes in to clarify matters.

The following first appeared in the Financial Post, 5 July 2012, p. FP11

For real estate, it's location, location, location. For national prosperity, it's innovation, innovation, innovation. Unfortunately, Canada still sets up shop in the low-rent district. We do lots of great R&D, which then sits on the shelf and collects dust.

The recent federal budget recognizes the problem and makes generous commitments for the support of innovation commercialization. There may be a fly in the ointment, however. The government plans to shift money out of the Scientific Research and Experimental Design tax credit (SR&ED - pronounced "shred" by aficionados) and into "direct" assistance, such as government-administered grants. This has the potential for harming rather than helping commercialization efforts.