Forbes – Last week, I detailed my fantasy of fleeing public accounting for life as an illegal bookmaker. I was, of course, indulging in nothing more than a bit of playful escapism, meant to dull the pain of another long busy season.
But after reviewing the Tax Court’s decision in Kaplan v. Commissioner, T.C. Memo 2014-43, I think I’m ready to give my two-weeks notice. Like, today. Because while Kaplan may not enlighten with regards to the tax law, it does reveal just how much bookmakers earn. And it’s a lot. As in a $24 million tax bill, which translates into approximately $75 to $160 million of taxable income, depending on the character.
In Kaplan, the taxpayer made the sound financial decision to drop out of high school so he could support his two children by taking bets. Following a 1993 arrest in New York City on sportsbooking charges, the taxpayer sought the more friendly gambling environs of Aruba before eventually landing in Costa Rica.
Around that time, Al Gore was gracious enough to invent the internet, and indirectly giving birth a highly lucrative offshore sports book industry.
Understand, sports betting is illegal in the U.S.because it is an evil, duplicitous act. (Unless of course, you’re in Vegas, in which case, feel free to parlay the Cowboys and 49ers to your heart’s content! No hypocrisy there.) As a result, prior to the internet era, bettors were forced to place their wagers with shady local bookies. Because bettors could wager money without actually fronting the cash, it was easy for a gambler to bet above his means and suddenly find himself in serious trouble with nefarious sorts.
