Ninth Circuit holds online gambling accounts not subject to FBAR reporting

The Ninth Circuit Court of Appeals held on July 26 that a taxpayer was not required to report certain online gambling accounts to the IRS because the accounts were established “merely for the purpose of facilitating poker playing.”

In U.S. v. Hom, No. 14-16214 (9th Cir. 2016), the taxpayer, John C. Hom, failed to file Treasury Form TD F 90-22.1 (now known as Treasury Form 114), a Foreign Bank and Financial Accounts Report (FBAR), for three accounts in 2006 and one account in 2007 related to PokerStars and PartyPoker.  The IRS assessed a $40,000 penalty and brought suit to collect in district court and won. Hom appealed to the Ninth Circuit, which concluded that the online poker sites did not function in the way a bank is commonly understood to function. Hom was required, however, to report intermediary bank accounts used to transfer funds to and from the gambling accounts.

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