QUESTION:
I have been wagering on sporting events with a sportsbook in the Netherlands
Antilles. On several occasions I have pulled my profits out, and deposited
them in my Canadian Bank account (myself being a Canadian citizen) The Bank
teller always asks me about the nature of this income. I always say it's
investment income.
I'm starting to wonder do I need to pay taxes on this, and the legality of
the whole thing.
So, I recently called Revenue Canada, and told them my story. They were
concerned whether I was running a gambling operation myself. I explained to
them I was only a player. They said this income is not taxable in Canada,
but may be in the country the sportsbook is located.
I'm not totally satisfied with the answer though. Reading the small print
in the tax code, it says if there is a reasonable expectation of profit, it
is taxable.
So, if over a few years I've been producing a profit, does that mean there
is a reasonable expectation of profit, and thus, taxable?
Also, I'm wondering why the teller at the bank is always asking me the
nature of this income. Do they have to report "unusual" deposits to the
authorities? Should I continue saying "Investment income", or, "Gambling
income"?
Thanks for your time,
JXXXXXX
---------------------------------------
david ingram replies:
Good question - The Gambling winnings are not taxable in Canada. On the
other hand, if you wander down to a Casino or play the horses in the USA, a
Canadian is taxable on their winnings in the USA.
You should not tell the bank the earnings are investment earnings.
Investment Earnings ARE taxable in Canada whether you invest in the Bahamas,
Grand Caymans or Bermuda.
I recently put $50,000 of income on a Canadian return and showed it as
gambling earnings for a professional gambler at his request. The CRA issued
an assessment removing the $50,000 and telling my client that Gambling
winnings are not taxable in Canada.
If your foreign deposits are more than $10,000 the Canadian bank will report
the deposit to FINTRAC as the following non-related question will show you.
Pay attention to the part about Canadian Forms E667 and E677 - because I
make this part of a newsletter, I have left in the US forms 104 and 105 for
the benefit of those who may win their money gambling in the USA and then
bring it back to Canada.
THANKS FOR RECEIVING THIS E-MAIL. GOT YOUR E-MAIL ABOUT THE HOSPITAL. GLAD
TO HERE THAT YOU ARE O.K.. ABOUT A MONTH OR SO I ASK YOU THIS SAME
QUESTION. I CLOSED OUT A BANK ACCOUNT IN MAY OF THIS YEAR IN THE US FOR
69000 AND BROUGHT IT TO CANADA IN A BANK DRAFT. YOU SAID I SHOULD HAVE STOP
AT THE US BORDER AND DROP OF A FORM 105 AND IN CANADIAN BORDER A FORM 667 .
I WASN'T AWARE OF THIS AT THE TIME. UNTIL YOU HAD THIS MONTHS AFTER ON YOUR
WEBSITE. IS IT TOO LATE TO DO THIS NOW OR DO I HAVE TO DO SOMETHING ELSE..
THANKS AND KEEP WELL
===================================
I believe that your bank Draft was a negotiable instrument and should have
been reported.
Fill the forms in now and mail them to the respective governments.
You need to fill out (as you have noted) Form 105 for the US and Form 667
for Canada.
Remember that the penalty for not reporting it to the US when you took the
negotiable instrument out of the US is: Confiscation of the money PLUS a
fine of up to $500,000 PLUS up to 5 years in jail.
Canada is not nearly as serious but bad enough.
At this point, the US bank will have or should have filled out form 104 when
you took the money out of the account and the money order or draft comes
back cashed out of the country.
The Canadian Bank should have reported the foreign draft when deposited or
cashed on Canadian form E677. Therefore, if you come to their attention,
the transaction has been documented and you are in trouble.
You can print out the forms below with this question answered Sept 1, 2004.
as you will note, I used an older question to answer that one because the
old forms had actually expired the day before.
==========
What forms do I have to fill out if I am transporting more than $10,000
across the Canadian Border
==============================
david ingram replies: The forms are E677 and E667 for Canada and as of
September 1, 2004 )today) 104 and 105 for the US if you are bringing the
money out of the US into Canada..
The US bank will report the deposit or withdrawal to the US FINCEN on form
4789 (which is still valid until August 31, 2004) or more likely the new
form 104 which you can find at: http://www.irs.gov/pub/irs-pdf/ffc104.pdf
When you then move the money to Canada by money order or check, the bank or
financial institution will report it again.
The US penalties for failure to fill in these simple forms is up to $500,000
PLUS 5 years in jail.
If you remove more than $10,000 at any one time, the bank will report those
transactions as well.
If you decide to carry the cash or transport it out of the USA as a
cashier's cheque, you have to file form 105 (old form 4790). You can find
the form at: http://www.irs.gov/pub/irs-pdf/ffc105.pdf
Canada has moved its forms in the last few days and i had a devil of a time
trying to find them. You can find both E677 and E667 below.
http://www.cbsa-asfc.gc.ca/E/pbg/cf/e677/e677-fill-02b.pdf
E667 is filled out by yourself and E677 is filled out by the financial
institution.
http://www.cbsa-asfc.gc.ca/E/pbg/cf/e667/e667-fill-02b.pdf
Answers to this and other similar questions can be obtained free on Air
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Disclaimer: This question has been answered without detailed information or
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