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.
Tax professional standards statement
This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.
The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.