I am delighted to see that Terry and Brian LeBlanc escaped the clutches of Revenue Canada:
Two brothers who made millions playing sports lotteries won’t have to give Revenue Canada a piece of their winnings.
In a decision issued Thursday in Ottawa, Tax Court Chief Justice Don Bowman ruled the multi-million-dollar fortune Brian and Terry Leblanc accrued by playing sports lotteries may defy explanation, but it was exempt from taxation.
Revenue Canada had claimed the brothers, former window-washers, had somehow found a way to beat the system, and demanded they be taxed as a business.
They are fortunate judges don’t study statistics, as these guys were buying $200K-$300K worth of tickets per week and won millions in the process. Suffice to say if they are winning like that over a long period of time it isn’t luck, and they certainly aren’t compulsive gamblers as the judge described them.
I hesitate to comment on this, lest Revenue Canada appeal the case, but far from defying explanation, their winnings are perfectly logical. The brothers are in fact skilled players who are exploiting poorly calculated odds set by incompetent gaming corporations. In some cases they were likely betting both sides of the same game in different jurisdictions, hedging the odds between different lottery corporations. Good for them, and what they’re doing is perfectly legal, but one has to say Revenue Canada was likely correct. Professional poker and blackjack players have to pay tax on their winnings if they gamble for a living, and this type of skilled sports betting is essentially the same.
While Revenue Canada likely had the stronger case, I’m delighted to see the judge failed to understand basics of the case. I wonder if Justice Bowman would like to join in in a friendly game of poker.
Don’t assume this is over. Good probability that CRA will take this to Federal Court of Appeal.
Heh. About 7 years ago, the BC Lottery Corp., in their “over or under” sports lottery, posted odds that any knowledgeable follower of the game in question (basketball) knew were impossible…in short, they posted a point spread that was a sure winner regardless of which team was selected. Knowledgeable players cleaned up, to the tune of many millions of dollars in winnings. BC lottery, very chagrined, attempted to challenge their attempts to collect, but was forced to back down.
Very funny.
Sports Select is a sucker’s game, unless you are willing to do what the brothers did, and bet ridiculous amounts of money.
Take the same cash you plop on a few SS tickets, open a sportsbook account, and go from there. You bet a three game teaser with a sportsbook, and you’ll get 10 times better odds than you do with the criminals at Sport Select.
I dont follow sports so the business of ‘point spread’ was greek to me.
I do however understand math and particular probability that I am not enamoured of the idea of ‘winning big’ in a lottery.
it continues to entertain me so-called casino and bingo ‘winners’ count exclusively the ‘winnings’ they get back from a bet, selectively ignoring the money it took to place the bet or purchase the bingo game cards in the first place.
ohh weeee !! they come in the room ‘I won 500 dollars tonite !!! oooo weeeeee !!!
I could never find out how much they spent up to that point to have probability tap them on the shoulder with a win. could never get a straight answer.
there is a great chasm difference between a pathetic 100 dollar a week sport select loser and a professional gambler with a gift for calculation and recollect who truly is making ‘business’ decisions at the poker table on the fly.
Im neither.
The salient question is: what are the qualifications required to be appointed to The Bench? Judging from this case, and others, I might ask; is a Liberal background sufficient?
I think the sailient question here might be: what are the qualifications required to be called to the Bench? Is a Liberal background sufficient?
While the LeBlancs were obviously systematic and methodical professional gamblers and therefore should be taxable, it may well be that our lawmakers screwed the pooch on this, thinking their lotteries were perfect and unbeatable they may have enshrined clear law that lottery winnings by any legal means are not taxable.
The bigger issue is why should incompetent govts. be in charge of regulating lotteries? Bookies do a better job. Period.
…so, while the judge probably is a Liberal political appointee and is therefore quite likely to be corrupt, stupid, and incompetent, it’s possible he made the right ruling and CCRA will only be wasting millions of dollars on lawyers if they appeal and try to tax the LeBlanc’s lottery winnings. But hey, that’s not real money, that’s tax dollars… Picture a team of lawyers hired by CCRA spending the next few years, at $450 per hour each, slooowly going over each and every lottery ticket the LeBlancs had, documenting and charting and analyzing the details, to prepare for their big appeal case…
…and then, finally, five years from now, the big question is resolved, there is a monumental announcement, the Supreme Court of Canada rules that, if lottery winnings are found to have been won by temperate, and systematic and methodical, means, it is professional gambling and should be taxable. CCRA is pleased with their victory.
Damn, I shouldn’t kid around like that, Kate, please delete my posts, I don’t want a major tax audit…
Several years ago, while working for H & R Block, I had a mother come in to have her sons tax return done. She asked if it was right that all money made had to be claimed, regardless of how it was made. We looked in the guide and she agreed that it had to be. We did a business stmt, income x amount, deductions x amount, etc. I questioned some of the deductions, especially the amount for keys and several types of hammers. He had no rent, utilities, but did have some car expenses. She refused to tell me how he earned his money, just saying he was self employed. Not until I got his address did I clue in to the name. Seems he was in the Lethbridge jail, for break and enter. His arrest and trial had been big news in the paper and I recognized the name. He did pay some tax. I also had a self employed lady, who said her profession was entertainer. She tried to deduct her makeup and clothes but couldn’t. They were necessary to her trade she said, and finally admitted she was a prostitute. She also paid taxes. Also had a client who swore up and down that money earned after 5p.m. was not taxable, if you had a regular 8-5 job.
Sigh. Chief Justice Bowman was appointed in 1991, during Mr. Mulroney’s time as Prime Minister. I think you are chomping at the bit too much.
I would also recommend waiting for the actual decision to be published before jumping to conclusions regarding his reasons. News reports are hardly a reliable indicator of judicial reasoning.
Lottery winnings are already taxed, before payout – lotto 6/49 is taxed at a rate of 40%, and other lotteries in Canada are taxed at a similar rate.
Boo hoo hoo. Rev Canada crying the blues over lost taxes from a few million in lotto winnings.
Yet, just a few years ago, they were quite happy to let some fat cat business owner (friend of the Liberal Party of Canada) off the hook on some $500 MILLION, when he conveniently moved his assets offshore. They never could explain the logic of that call, and I don’t believe they were too interested in pursuing it in the first case.
Yep. Tons of consistency here folks.
Might a ruling in favour of the CRA opened the door to increased claims of business losses from systematic and methodical gamblers that aren’t so lucky, such as myself?
Maybe this isn’t a win for the common people!
speaking of the gang at revenue canada, try this:
they disagreed on a slew of deductions against rental income and shoved a big bill for arrears in front of me.
seems they felt that 80% depreciation in one year for a lawn mower was excessive. I asked them which one of them would show up to work up a sweat trying to start the thing which was a piece of crap. and besides maintaining the property was a draw to prospective tenants, right?
nada.
ok, lets try this: I charge them $1 per month rent to establish their rights as tenants, then they pay their share of utilities directly to the utility company.
capped at the amount they were previously paying in rent.
I dont see any of the money. ’tis a loophole aye.
so rev can, where is the rental income youre going to tax now? a dollar a month ?
oh no, I did NOT issue receipts for the friggin utility payments. why would I? they didnt give me the money all they did was show me a printout of their acct statement which I reconciled against the subsequent utility bills.
big fat loophole; get the tenants to pay the utilities directly, just keep a close watch on the payments.
rental I/C = 30-40 bucks a year.
no need for the annual scramble to find matching deductions.
“while the judge probably is a Liberal political appointee and is therefore quite likely to be corrupt, stupid, and incompetent”
Nice.
“THE HONOURABLE DONALD GEORGE HUGH BOWMAN, B.A., LL.B. was born on July 14, 1933, in Guelph, Ontario. He is the son of Charles Howard Bowman and Grace Louise Dawson. He studied at Guelph Collegiate, Victoria University, the Ontario College of Education and at the Faculty of Law at the University of Toronto. He was a teacher at the Märkisches Gymnasium, Iserlohn, Nordrhein/Westfalen, Federal Republic of Germany and at the Fergus District High School and Delta Secondary School in Hamilton. Associate Chief Justice Bowman was called to the Bar of Ontario in 1962. He joined the Federal Department of Justice, Tax Litigation Section in 1962 and was appointed Director in 1968. He co-founded the law firm of Stikeman, Elliott, Robarts & Bowman in 1971 and was a partner until his appointment to the Tax Court of Canada. He was appointed Queen’s Counsel in 1974 and has been a member of the New York Bar since 1982. He was appointed Judge of the Tax Court of Canada in 1991 and Associate Chief Judge in February 2000. He was appointed Associate Chief Justice in July 2003 and Chief Justice in February 2005.”
1991 – Wasn’t Mulroney in power in 1991?
So then gambling losses are allowable as business deductions? Excellent!
Ed,
Lotteries may be a tax on the stupid but they are NOT subject to any tax in Canada:
From the CRA website: http://www.cra-arc.gc.ca/tax/individuals/topics/income-tax/return/completing/reporting-income/nottaxed-e.html
Amounts that are not taxed
You do not have to include certain amounts in your income, including the following:
any GST/HST credit or Canada Child Tax Benefit payments, as well as those from related provincial and territorial programs;
Quebec family allowances and the Allowances for Handicapped Children paid by the province of Quebec;
compensation received from a province or territory if you were a victim of a criminal act or a motor vehicle accident;
lottery winnings;
most gifts and inheritances
In the US they are heavily taxed but not yet here.
kevink, as usual tax laws are enormously complex. It is true that any gambling winnings for fun or recreation is not taxed, and that is true whether it’s lottery or any other casino game. But there’s the exception for the pros:
(http://www.cra-arc.gc.ca/E/pub/tp/it334r2/it334r2-e.html)
In addition, an individual may be subject to tax on income derived from gambling itself, if the gambling activities constitute carrying on the business of gambling; see the decision of MNR v. Morden, (1961) CTC 484, 61 DTC 1266 (Ex. Ct.). The issue of whether or not an individual’s activities are such that he or she can be considered to be carrying on a gambling business is a question of fact that can be determined only by an examination of all of the circumstances and the taxpayer’s entire course of conduct. Although no one factor may be conclusive, the following criteria should be considered in making the determination:
(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.
It’s pretty clear these guys are highly skilled bettors gambling for a living, but were able to persuade the judge that they were just compulsive gamblers on a lucky streak. Good for them, both for their skill at spotting the opportunities and for snowing the judge.
Kevin J – that is not what Ed said which was ” Lottery winnings are already taxed, before payout – lotto 6/49 is taxed at a rate of 40%, and other lotteries in Canada are taxed at a similar rate.”
I was only attempting to clear up an obvious error – it did not seem he was referring to pros but all 6/49 winnings which is clearly not the case.
The CRA will appeal this as it seems obvious these two guys are about as amateur as the Red Army hockey team of the ’70’s.
There are also amounts that must be included in income, to arrive at total income, and are later deducted to arrive at net income, and taxable income. Welfare pymts, WCB pymts, and OAS subsidy and provincial subsidies are just a few of them.
Lottery winnings are not included anywhere.
Alan, he was a Mulroney appointee, likely from your profile a good choice; expected from Mulroney.
I stand corrected.
The judge made the correct ruling here. In tax case law, gamblers have only lost two cases to my knowledge. In both instances, the gamblers had to pay tax because they were betting on events that they were directly involved themselves, and thus could influence the outcome in their favour. One was a pool shark betting on his won game he was playing. The other was a horse owner and trainer betting on his own horses which he could have an influence over.
In both cases the betting was part of his overall occupation or business. There are other cases in England and Australia that confirm this position. In fact, it is clear in case law, not only in Canada, but in England as well that merely betting, and only betting, can not be taxable even if the gambler is a consistent large winner.