23 January 2008 External T.I. 2007-0238601E5 - Taxation of a Person's Gambling Activities

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Income tax treatment of an individual's on-line poker earnings/losses.

Position: Question of fact. However, it appears that these gambling activities are undertaken more for personal pleasure and would not constitute business activities carried on by the individual.

Reasons: The law.

XXXXXXXXXX 								2007-023860
									Michael Cooke
January 23, 2008

Dear XXXXXXXXXX :

Re: Taxation of Gambling Activities

This is in reply to your electronic correspondence dated June 3, 2007 concerning whether income and losses from your gambling activities as described in your correspondence constitute income or losses from the carrying on of a business.

Our Comments

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. We are, however, prepared to offer the following comments.

The determination of whether a person's gambling activities constitute the carrying on of a business in the pursuit of profit that results in a source of income under the Income Tax Act (the "Act") is a question of fact that can only be determined by an examination of all the circumstances and the taxpayer's entire course of conduct. In this regard, we refer you to the Canada Revenue Agency's ("CRA") general comments contained in paragraphs 10 and 11 of Interpretation Bulletin IT-334R2 Miscellaneous Receipts under the headings "Gambling Profits" and "Hobbies", respectively.

Paragraph 10 of Interpretation Bulletin IT-334R2 lists some of the factors that may be of assistance for making such a factual determination as follows:

"(a) the degree of organization that is present in the pursuit of this activity by the taxpayer,

(b) the existence of special knowledge or inside information that enables the taxpayer to reduce the element of chance,

(c) the taxpayer's intention to gamble for pleasure as compared with any intention to gamble for profit as a means of gaining a livelihood, and

(d) the extent of the taxpayer's gambling activities, including the number and frequency of bets.

Based on the limited facts described in your correspondence, your gambling activities appear to be conducted primarily for your pleasure as a hobby and without special knowledge. In such circumstances, and as noted above, earning or losses from such gambling activities would be of a personal nature and would not constitute earnings or losses of a business.

A copy of IT-334R2 may be obtained from your local tax services office or from Canada Revenue Agency's web site at www.cra-arc.gc.ca.

We trust the above comments are of assistance.

Yours truly,

Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch