Any Gambler's In Your Tax Practice Clientele?

Posted by Lee Reams II on

If so, you should take note of a tax court case (Hom (DC CA /6/4/2014)) decision requiring an on-line gambler to file an FBAR for an on-line gaming account with an out-of-the-country on-line casino. He was fined for not making an FBAR reporting of his online account and the tax court sided with the government.

John Hom gambled online and had accounts worth more than $10,000 during the years in question with two online poker companies, PokerStars and PartyPoker. He used a third company, an online financial organization, FirePay.com, to facilitate the transferring of money to and from his two poker accounts; he also had more than $10,000 in his FirePay account during one of the years in question.

IRS assessed Hom with 31 USC 5321(a)(5) penalties for his non-willful failure to submit FBARs, reporting his interest in his FirePay, PokerStars, and PartyPoker accounts.

The court agreed with the assessment of the FBAR penalties - The only issues in the case were: (1) whether Hom's accounts with the poker companies were "a bank, securities or other financial account"; and (2) whether each of the three accounts was in a foreign country. The court answered "yes" to both of these issues and, as a result, agreed with IRS's assessment of the penalties.