October 2022 Newsletter

In Canada, gambling winnings are not taxable unless the taxpayer is found to be in the business of gambling. The courts have been quite reluctant to find this to be the case. A recent court decision provides an example.

In the Duhamel case, the taxpayer earned significant amounts from gambling – for instance, in 2010 he won $4 million while playing the “Main Event” of the World Series of Poker. The CRA assessed Mr. Duhamel, claiming that his gambling activities amounted to a business and thus that the $4 million should have been included in his income.

The Tax Court of Canada disagreed with the CRA, and held that the evidence in the case showed, overall, that Mr. Duhamel’s gambling did not show a business-like approach or a consistent ability to generate profits. In some other years he had very significant losses and he was basically gambling for fun and hoping to win, without a “system” for winnings. Therefore, the Tax Court found that he did not act as a “serious businessman” in the gambling activities, the activities were not exercised in a sufficiently business-like manner to qualify as business income, and he was not carrying on a gambling business. His winnings were therefore tax-free.

Last modified on October 13, 2022 12:00 am
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