Revenooer Rants: IRS doesn’t fold regarding foreign poker accounts
Beware of IRS subtleties when it comes to those foreign account reports due by June 30. Taxpayer Hom recently found out the hard way, when a California District Court sided with the Revenooers regarding the question of whether online poker accounts had to be included.
We have recently mentioned the overall rules in this area — a bloke’s foreign bank account report (FBAR) must be filed if he is a U.S. person and has a financial interest in, or signature or other authority over, a bank, securities or other financial account in a foreign country, and in aggregate amounts exceeding $10,000.
Our boy, Hom, gambled online (via accounts exceeding the threshold) with two online poker companies: PokerStars and PartyPoker, and also engaged FirePay.com to facilitate transferring money to and from his poker accounts.
The Ninth Circuit Court of Appeals had previously broadly defined exactly what qualifies as a financial institution, and regarding the location of those institutions in this case, the Hom Court found that these “digital” entities which he used were all located outside of the U.S. of A.!
Result: Hom gets to pay the penalties for not having reported these accounts in his FBAR.
Which reminds us of other “virtual” issues sometimes encountered in dealings with IRS.
Are you into “virtual” currency – like, f’rinstance, Bitcoin which can be digitally traded between users and purchased for or exchanged into U.S. dollars?
If so, fear not regarding the FBAR implications of this new dalliance, according to Ron Lundquist, Senior Program Analyst in IRS’ Small Business/Self Employed division. Seems that during a recent IRS webinar, Lundquist stated that for purposes of the current filing season, at least (i.e. – for 2013 activities, the reports for which are due by the end of this month), taxpayers aren’t required to report Bitcoin on their FBARs.
And finally this week comes yet another word from the Tax Court that folks need to be very careful when moving funds around their IRAs.
Taxpayer Dabney tried to have his IRA purchase some real estate — an IRA held by Schwab, a custodian which doesn’t permit “alternative investments” with IRA funds. Upon hearing this seemingly bad news, Dabney nonetheless went ahead with the purchase of the land, thinking he’d be clever, and instructed Schwab to name “Guy M. Dabney Charles Schwab & Co. Inc. Cust. IRA Contributory”. The deal went forward, though due to a clerical error, title to the property was placed in Dabney’s own name.
Schwab later issued the inevitable 1099-R, reporting the purchase amount as a taxable distribution, which, of course, Dabney didn’t report. On audit, IRS said “pay up,” an order to which the Tax Court agreed — on the basis of the fact that even though the law does allow IRAs to hold realty, the Schwab policy in this case prohibiting such investments was all they needed to hear.
Even if the title had been properly recorded, this particular Schwab IRA couldn’t hold real estate and would not have accepted ownership of it.
End of story.
CONSULT YOUR TAX ADVISOR – This article contains general information about various tax matters. You should consult your CPA regarding the implications to your own particular situation. Jeff Quinn is a shareholder in Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno. He welcomes comments at firstname.lastname@example.org.
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If Israel and the United Kingdom are any indication, widespread vaccination will knock the pandemic down to … normal life. Something near.