NFBC Prize Payment Update and Timeline

[viper]

If you sell $20,000 in a mutual fund and use those proceeds to immediately purchase $20,000 in another fund, you have a taxable event and you will received a 1099. You taxable amount will be $20,000 less your basis. This is a fact.



Here, you are receiving prize money and are electing to spend that money to purchase a 2011 entry. Again, this is two separate events. The first event is taxable but your expenses can be used to offset that taxable income provided that are spent in 2010. I'm sure that winning held in your account by Fanball or any other similar company are taxable. Failure to send you a 1099 would cause Fanball IRS issues.

[Glenneration X]

Mark, you took my last comment (worded the way it was partially in jest) out of the context that was intended.



The point I was trying to make is I wouldn't have to explain to the IRS if no 1099 was issued

(and to the main point I was trying to convey) as none should be.



I truly believe this and I think I made my reasons clear as to why.



Mark, you and I have debated this issue before on different boards in the past and it's apparant that neither of us is going to change the other's mind. Let's leave it to the powers that be to advise us of the way it will be handled. I just hope that the reasons given for whatever policy is put forth is based on tax law and not the reasons KJ put forth as a possibility.



Glenn

[viper]

Glenn, by law, you are required to claim any winnings whether you receive a 1099 or not. It could be just $100 and Fanball would not be required by law to send you a 1099 or the IRS a 1096/1099. But it is still supposed to be claimed. I'm not saying that people do it but that is the law.

[Gekko]

Originally posted by KJ Duke:

quote:Originally posted by Gekko:

quote:Originally posted by KJ Duke:



In the case of a fantasy contest not disbursing funds on your behalf, you never come into control of the money and their is no custodial contract; it is under their control until dispersed. read Greg's post. it seems clear that any 2010 winnings is controlled by the participant.



Originally posted by Greg Ambrosius:

New for this year: We'll allow you to transfer some of your 2010 winnings to 2011 payments if you'd like. [/QUOTE]You can direct them to do something, but they still control it. It's like a business sending a bill; it's not income 'til payment is received.



Fanball is neither a bank nor brokerage firm with "legal custody" of your money. That's a very important distinction. [/QUOTE]I remember Greg posted that Fanball was asked about the practice of allowing owners to roll over money without Fanball issuing a 1099. I believe they said it was illegal.

[Glenneration X]

Originally posted by viper:

Glenn, by law, you are required to claim any winnings whether you receive a 1099 or not. It could be just $100 and Fanball would not be required by law to send you a 1099 or the IRS a 1096/1099. But it is still supposed to be claimed. I'm not saying that people do it but that is the law. If and when you receive it, not when it is won. I think the Fantasy Jungle example was an excellent one. Do those poor bastards owe taxes on what they won even if they never received it?



Glenn

[viper]

Originally posted by Glenneration X:

quote:Originally posted by viper:

Glenn, by law, you are required to claim any winnings whether you receive a 1099 or not. It could be just $100 and Fanball would not be required by law to send you a 1099 or the IRS a 1096/1099. But it is still supposed to be claimed. I'm not saying that people do it but that is the law. If and when you receive it, not when it is won. I think the Fantasy Jungle example was an excellent one. Do those poor bastards owe taxes on what they won even if they never received it?



Glenn [/QUOTE]I guess two scenarios exist here.



First, if Fanball goes out of business and never send you a check or even places you winnings on account, I would suspect that you would not have taxable income.



Second, if you directed Fanball to put your winning on account, they did and then prior to next season, Fanball went out of business, my guess is you would have income and a claim in bankruptcy court. Good luck in that case.

[Glenneration X]

I also don't agree with the comparison between a stock account governed by federal regulations and monitored by the SEC or an interest bearing account governed by federal regulations and protected by the FDIC to that of a fantasy sports account governed, monitored, & protected only by the conscience of the contest runner himself.



Glenn

[Glenneration X]

Originally posted by viper:

Second, if you directed Fanball to put your winning on account, they did and then prior to next season, Fanball went out of business, my guess is you would have income and a claim in bankruptcy court. Good luck in that case. Ummmm, whose directing anyone to put anything into an account?



Glenn

[viper]

I thought part of the discussion was telling Fanball to apply some of our winning towards the purchase of a 2011 entry. Of course, to be a 2010 deduction, it would have to be actually spent in 2010 as we are all cash basis taxpayers and not accrual basis.

[TOXIC ASSETS]

Guys, some good points have been made on all sides. Here is the bottom line:



1) DO NOT have Fanball roll your winnings into next year's entry fee. Take the check and see the winnings from all the time that went into a winning fantasy season. This also avoids any type of issue as what happened with Fantasy Jungle.

2) As soon as you receive that check, it is now classified as "income".

3) The IRS will be looking to get their share of your winnings from that check. Remember that our government is flat broke and is looking for money under the mattress right now and wherever else they can find it. Thank you GWB and BHO. Sorry to go off topic....

[JohnZ]

Originally posted by Gekko:

quote:Originally posted by Glenneration X:

I wouldn't have to if I didn't receive a 1099.



Glenn I can't live that way...knowing if I ever get audited as a result of an FFPC or WCOFF investigation that I didn't report the earnings. Probably unlikely to happen, but I like having the peace of mind.



PS - You never know what some people will do. If the economy gets worse, I can see some unemployed baller reporting those companies to the IRS to try and get a whistle-blower reward. [/QUOTE]And neither would have a problem as they have legal counsel that has given them a legal opinion that what they are doing is correct.



If you seek legal advice and then act upon that advice, it's pretty hard to be found at fault.



On the rolling over of prizes, Snapdraft does it every day of the year. (as do all the daily games)

[Glenneration X]

Originally posted by JohnZ:

quote:Originally posted by Gekko:

quote:Originally posted by Glenneration X:

I wouldn't have to if I didn't receive a 1099.



Glenn I can't live that way...knowing if I ever get audited as a result of an FFPC or WCOFF investigation that I didn't report the earnings. Probably unlikely to happen, but I like having the peace of mind.



PS - You never know what some people will do. If the economy gets worse, I can see some unemployed baller reporting those companies to the IRS to try and get a whistle-blower reward. [/QUOTE]And neither would have a problem as they have legal counsel that has given them a legal opinion that what they are doing is correct.



If you seek legal advice and then act upon that advice, it's pretty hard to be found at fault.



On the rolling over of prizes, Snapdraft does it every day of the year. (as do all the daily games) [/QUOTE]Excellent point on the daily games, especially Snapdraft since that is run by the only contest that doesn't allow rollovers for its annual games.



Glenn

[Gekko]

Originally posted by JohnZ:

quote:Originally posted by Gekko:

quote:Originally posted by Glenneration X:

I wouldn't have to if I didn't receive a 1099.



Glenn I can't live that way...knowing if I ever get audited as a result of an FFPC or WCOFF investigation that I didn't report the earnings. Probably unlikely to happen, but I like having the peace of mind.



PS - You never know what some people will do. If the economy gets worse, I can see some unemployed baller reporting those companies to the IRS to try and get a whistle-blower reward. [/QUOTE]And neither would have a problem as they have legal counsel that has given them a legal opinion that what they are doing is correct.



If you seek legal advice and then act upon that advice, it's pretty hard to be found at fault.



On the rolling over of prizes, Snapdraft does it every day of the year. (as do all the daily games) [/QUOTE]is this the legal advice?



the IRS tax code doesn't spell out fantasy earnings specifically. because of this we are choosing our own interpretation and not issuing 1099s for "rolled over" earnings.



if the IRS ever comes back and said that our legal advice was wrong, okay we will issue amended 1099's. it won't harm us (the fantasy games) much, if at all.



however...any player who didn't report all of their winnings would be facing back taxes (with interest and penalties)



again, it's unlikely this would happen, but all it takes is one disgruntled baller to ask the FEDS about these situations. the state of Pennsylvania already determined residents need to pay taxes on all fantasy earnings, even "rolled over" earnings

[Gekko]

and if i were a ponzi company, i'd be looking for ways of paying out less, ie, allowing owners to keep rolling over winnings.



not saying the shoe fits any of these companies, but that's one of the red flags i look out for.

[Glenneration X]

Originally posted by Gekko:

quote:Originally posted by JohnZ:

quote:Originally posted by Gekko:

quote:Originally posted by Glenneration X:

I wouldn't have to if I didn't receive a 1099.



Glenn I can't live that way...knowing if I ever get audited as a result of an FFPC or WCOFF investigation that I didn't report the earnings. Probably unlikely to happen, but I like having the peace of mind.



PS - You never know what some people will do. If the economy gets worse, I can see some unemployed baller reporting those companies to the IRS to try and get a whistle-blower reward. [/QUOTE]And neither would have a problem as they have legal counsel that has given them a legal opinion that what they are doing is correct.



If you seek legal advice and then act upon that advice, it's pretty hard to be found at fault.



On the rolling over of prizes, Snapdraft does it every day of the year. (as do all the daily games) [/QUOTE]is this the legal advice?



the IRS tax code doesn't spell out fantasy earnings specifically. because of this we are choosing our own interpretation and not issuing 1099s for "rolled over" earnings.



if the IRS ever comes back and said that our legal advice was wrong, okay we will issue amended 1099's. it won't harm us (the fantasy games) much, if at all.



however...any player who didn't report all of their winnings would be facing back taxes (with interest and penalties)



again, it's unlikely this would happen, but all it takes is one disgruntled baller to ask the FEDS about these situations. the state of Pennsylvania already determined residents need to pay taxes on all fantasy earnings, even "rolled over" earnings [/QUOTE]You're wrong here. If you receive the check and then utilize those funds for future entries, those costs are offset against the previous winnings and reduce your overall taxable income as long as it's within the same tax year. The outcome in regards to taxable income is exactly the same as if you rollover in this case.



The only real question is in regards to funds left on account and neither cashed out nor utilized for additional entries. For those instances I maintain that it is not considered income until you receive the funds. I don't think it legally can be considered income until you receive the funds.



Glenn



[ October 16, 2010, 08:48 AM: Message edited by: Glenneration X ]

[Gekko]

Originally posted by Glenneration X:

You're wrong here. If you receive the check and then utilize those funds for future entries, those costs are offset against the previous winnings and reduce your overall taxable income as long as it's within the same tax year. if you are paying for a contest in December (so you can write it off in 2010), but the contest doesn't actually start until March or April, that looks like you are doing it for one purpose...to avoid taxes. i wouldn't want to be the one trying to make that case to the IRS (or State)

[Glenneration X]

Originally posted by Gekko:

quote:Originally posted by Glenneration X:

You're wrong here. If you receive the check and then utilize those funds for future entries, those costs are offset against the previous winnings and reduce your overall taxable income as long as it's within the same tax year. if you are paying for a contest in December (so you can write it off in 2010), but the contest doesn't actually start until March or April, that looks like you are doing it for one purpose...to avoid taxes. i wouldn't want to be the one trying to make that case to the IRS (or State) [/QUOTE]Wrong. It's just like the case of when winnings are paid out. If they're paid out in 2011, that's the tax year for which those funds are applied. It means nothing for what tax year the contest was held. Again, I'll use the lottery winner example. You only owe taxes for what portion of the lottery winnings you received that year. You can also offset the cost of the lottery ticket for the year you paid for it, whether you're to receive the winnings the following year or even later.



Glenn



[ October 16, 2010, 09:07 AM: Message edited by: Glenneration X ]

[Gekko]

Originally posted by Glenneration X:

quote:Originally posted by Gekko:

quote:Originally posted by Glenneration X:

You're wrong here. If you receive the check and then utilize those funds for future entries, those costs are offset against the previous winnings and reduce your overall taxable income as long as it's within the same tax year. if you are paying for a contest in December (so you can write it off in 2010), but the contest doesn't actually start until March or April, that looks like you are doing it for one purpose...to avoid taxes. i wouldn't want to be the one trying to make that case to the IRS (or State) [/QUOTE]Wrong. It's just like the case of when winnings are paid out. If they're paid out in 2011, that's the tax year for which those funds are applied. It means nothing for what tax year the contest was held. Again, I'll use the lottery winner example. You only owe taxes for what portion of the lottery winnings you received that year. You can also offset the cost of the lottery ticket for the year you paid for it, whether you're to receive the winnings the following year or even later.



Glenn [/QUOTE]you keep saying i'm wrong. and that's fine. again, the state of PA says you are wrong and if asked, i'd wager both the state you live in and the FEDS would say you are wrong as well. good luck.



[ October 16, 2010, 09:11 AM: Message edited by: Gekko ]

[Glenneration X]

Originally posted by Gekko:

quote:Originally posted by Glenneration X:

quote:Originally posted by Gekko:

quote:Originally posted by Glenneration X:

You're wrong here. If you receive the check and then utilize those funds for future entries, those costs are offset against the previous winnings and reduce your overall taxable income as long as it's within the same tax year. if you are paying for a contest in December (so you can write it off in 2010), but the contest doesn't actually start until March or April, that looks like you are doing it for one purpose...to avoid taxes. i wouldn't want to be the one trying to make that case to the IRS (or State) [/QUOTE]Wrong. It's just like the case of when winnings are paid out. If they're paid out in 2011, that's the tax year for which those funds are applied. It means nothing for what tax year the contest was held. Again, I'll use the lottery winner example. You only owe taxes for what portion of the lottery winnings you received that year. You can also offset the cost of the lottery ticket for the year you paid for it, whether you're to receive the winnings the following year or even later.



Glenn [/QUOTE]you keep saying i'm wrong. and that's fine. again, the state of PA says you are wrong and if asked, i'd wager both the state you live in and the FEDS would say you are wrong as well. good luck. [/QUOTE]...and I would wager that the state of PA and my state of NY and the FEDS would all say that I am right in regards to the specific examples in which I disputed your contention of when winnings are taxable and when entry fees can be used to offset taxable income and the fact that they only apply to the year they are paid or paid out.



I'll also say that if you pay me on this wager in 2011 that I would not have to pay taxes on it in 2010 just because the wager was made this year.



In all seriousness Mark, we both made points and we both obviously believe strongly on the sides for which we're debating. Let's see what Greg comes back with and that'll be that.



Catch you soon & good luck to you too.



Glenn

[Gekko]

to be clear..my point is that a 1099 form need to be issued for all prize money won by your teams in 2010 (even money rolled over and/or used to pay other event fees).

[CC's Desperados]

Originally posted by Gekko:

to be clear..my point is that a 1099 form need to be issued for all prize money won by your teams in 2010 (even money rolled over and/or used to pay other event fees). You are wrong. The word is paid. Paid for winnings....you report income when your receive the money. When you ask the question about prize money won, they are assuming you were paid. Won/ winnings aren't the transaction. The payment is.



If I won the NFBC in 2010 and I received my check in 2011, when am I reporting the income? The year you receive the check.

[Gekko]

Originally posted by CC's Desperados:

quote:Originally posted by Gekko:

to be clear..my point is that a 1099 form need to be issued for all prize money won by your teams in 2010 (even money rolled over and/or used to pay other event fees). You are wrong. The word is paid. Paid for winnings....you report income when your receive the money. When you ask the question about prize money won, they are assuming you were paid. Won/ winnings aren't the transaction. The payment is.



If I won the NFBC in 2010 and I received my check in 2011, when am I reporting the income? The year you receive the check. [/QUOTE]listen - for baseball, fanball is paying you in 2010. that is when you'd report it.



yes, if you were playing a game that sent out checks in 2011, that is when you'd report it. but even that is murky. if the company sent you a 2010 1099 but you didn't receive the prize money until 2011 you could be asking for an audit if you don't report it in 2010 tax year.



anyways, this was never in question for baseball (which is what we are discussing), so i'm not sure why glenn is arguing that point or thinks that i am wrong. fanball is paying all owners in 2010



[ October 16, 2010, 10:41 AM: Message edited by: Gekko ]

[Glenneration X]

Originally posted by Gekko:

checks



so i'm not sure why glenn is arguing that point or thinks that i am wrong. I'll clarify. The basis of my argument is the key word I quoted above "checks".



This was a moot point in the past in regards to the NFBC, because once winnings were earned, "checks" were sent out. No other options were made available by the contest. Therefore once "checks" were sent out, 1099's followed for the amounts of the "checks".



Now with the creation of "fantasy accounts", unilaterally implemented by Fanball, I believe the situation is now different. My argument is that placement of winnings into these "fantasy accounts" should not be considered payment nor be the trigger for 1099's. The trigger should remain the receipt of "checks". If I never receive "checks" from this account, I should never receive a 1099, because in my opinion the winnings or income has never been received.



That's my argument, no more, no less.



Glenn



[ October 16, 2010, 11:28 AM: Message edited by: Glenneration X ]

[Tax Man]

A few bits of info from the tax law:



Where a contest winner is given the option of receiving either a lump-sum payment or an annuity, constructive receipt principles require inclusion of the value of the award in gross income even if the annuity option is exercised. For an exception where the option to receive a lump sum is a “qualified prize option,”



A “qualified prize option” is an option that:



... entitles an individual to receive a single cash payment in lieu of a qualified prize (or remaining portion thereof), and

... is exercisable not later than 60 days after the individual becomes entitled to the prize.



A “qualified prize” means any prize or award that:



... is awarded as part of a contest, lottery, jackpot, game, or similar arrangement,

... doesn't relate to any past services performed by the recipient and doesn't require the recipient to perform any substantial future services, and

... is payable over a period of at least 10 years.



And this right from the fanball website:



Q: How do I report my winnings on my taxes?

A: For customers who receive $600 or more in a calendar year, Fanball is required to file a form 1099 with the IRS by February 28th following the tax year. A copy of the 1099 also will be supplied to the prize winner to aid in tax preparation. The prize winnings are accumulated for all prizes awarded during the tax year and are totaled regardless of whether or not the prize money was placed on a Fanball account or issued as a check.

[DOUGHBOYS]

The Tax Man always has the last word.