Exploring the Source Concept of Income: The Taxation of Poker Winnings in Canada

Abstract

The source concept of income is difficult to pin down in Canadian income tax law. It is elusive and defies simple explication. Nowhere is this more true than in the context of gambling winnings. In this essay, the tax treatment of poker and other gambling winnings is used as a window into how the Canadian courts have reasoned about the source concept of income. For the purposes of establishing and explaining the legal foundation for this essay, Part II canvasses the relevant Canadian income tax legislation and case law on gambling gains and synthesizes the results. Part III analyzes in general the case of the potential tax liability of poker players and suggests that based on the current state of the case law it is probably in only unusually active and financially successful circumstances that taxpayers would even potentially face income tax liability on gains from poker playing in Canada. Part IV concludes with linking the foregoing analysis to the source concept of income more generally.