Practitioners See Court Overreach in Labelling Online Gambling Sites Foreign Financial Institutions – Los Angeles Income Tax Planning & Income Tax Litigation Attorney Bruce Givner

by Bruce Givner on June 19, 2014

On June 4, Judge William Alsup of the US District Court for the Northern District of California made a ruling that has led some practitioners to accuse the court and the government of overreach. Specifically, Judge Alsup ruled that accounts held by an online poker player, John C. Horn, were reportable as foreign financial accounts under the Bank Secrecy Act, and that Horn was, therefore, liable for tax penalties for failing to report those assets.

Practitioners across the country have responded negatively, arguing that the court overstepped its bounds. For example, gaming attorney Jeff Ifrah  pointed to this case as an example in which the government is trying “to morph existing U.S. law into brand new territory that is undefined.” As the internet continues to evolve, Ifrah believes more such examples will continue to cause controversy .

However, at least one practitioner finds fault with what Horn did and  with the court’s analysis. Russell Fox, a principal at the Las Vegas firm Clayton Financial and Tax, argues that Horn made a mistake by lumping together his accounts on three separate websites. Along with his accounts on PokerStars.com and PartyPoker.com, Horn included his account on FirePay, a third-party payment processor. Since it is undebatable that FirePay, as a company that moves money, issues credit and debit cards, and allows for electronic banking, operates in ways similar to that of a commercial banking institution. “On this account I agree completely with the ruling,” said Fox. He added, “[Horn’s] argument on FirePay was – and is – a losing argument. His argument on PokerStars and Party Poker was far stronger.”

With legal poker sites now operating in the US, there is certainly an opportunity for comparisons between the operations of these types of companies alongside those covered by the Bank Secrecy Act. However, as these poker sites don’t allow for transfers to other gaming sites or carry out functions like paying interest or making loans, in this case the court’s argument seems a bit of a stretch.

Givner & Kaye focuses on sophisticated income tax planning and compliance, tax litigation and procedure, estate planning, and asset protection plans for individuals and businesses in Beverly Hills, Calabasas, West Los Angeles, Hollywood, and other areas of Los Angeles, Orange, Ventura, San Bernardino, Riverside and Santa Barbara Counties. Call Los Angeles Estate Planning and Asset Protection Plan Attorneys Givner & Kaye at (310) 207-8008 today.

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