Judgment reserved in Jonathan Duhamel Canada tax case after hearings conclude

Haley Hintze Author Photo
Haley Hintze
Posted on: January 12, 2022 07:42 PST

The long-running battle between 2010 World of Series of Poker Main Event winner Jonathan Duhamel and the Canada Revenue Agency over asserted taxes due in Canada on Duhamel's $8.9 million payday is nearing its conclusion. Following a multi-day hearing in November and a subsequent appeal in early December, a judgment in the case was issued late last month but remains reserved for formal issuance.

Duhamel's tax case is significant for Canadian poker players. The country is among numerous worldwide jurisdictions that does not impose income tax on gambling games of luck. However, as in Duhamel's matter, Canadian tax authorities deemed that Duhamel was a professional player at the time of his $8.9 million win at the 2010 WSOP and for at least some time thereafter. According to the CRA, since Duhamel was playing poker as a form of self-employment, he then owed tax on his winnings. When revealed, the case's decision will have impact on how thousands of Canadian players will treat their poker winnings in the future.

Since bringing its claim against Duhamel in 2018, the CRA has sought CA $1.2 million in back taxes, interest and fees. The case first drew public attention in 2020 and was scheduled to begin its live-hearings phase in March of 2021. The case was postponed twice, however, due to COVID-19, and it wasn't until November that Duhamel pled his case in the Tax Court of Canada.

Duhamel claimed WSOP Main Event win was "luckiest" victory ever

According to a report in Canada's La Presse on the tax hearing's opening day in November, Duhamel downplayed any skill elements involved in his Main Event win. “I was extremely lucky,” he told the court. "I really didn't deserve it." Duhamel further declared that he'd overestimated his skill at the game, if indeed there was any skill involved. “I could try to make myself believe that I am the best, but the reality is, I was lucky when I had to [be]. I accept my fate,” he said.

The claimed emphasis on luck was vital to Duhamel's luck-versus-skill defense, as only games of luck are exempted from Canada's taxation reach. And, of course, it's a truism of poker that no one wins a huge tournament such as the WSOP Main Event without a huge dollop of good fortune. Yet downplaying both the game's skill elements and Duhamel's own poker history made his defense against the CRA's claims much more difficult.

Duhamel swapped Main Event action with grind-house residents

Revelations Duhamel made early in the Tax Court hearing may have been designed to limit his potential liability but likely did little to dissuade the court that he was anything other than a skilled player playing professionally at the time of his 2010 Main Event win. As the Canadian news reports detailed, Duhamel declared that he'd swapped 46% of his Main Event action with a dozen other poker players who all lived in the same shared rental house in Montreal.

If Duhamel's claim is true, than he actually won $4.8 million instead of the $8.9 million officially listed as the 2010 Main Event's first-place prize. Duhamel also declared that he duly paid his 30% withholding tax to the U.S., as mandated for international players and enforced by the WSOP. (Though not detailed as such in the Canadian mainstream reports, Duhamel likely paid the 30% withholding on the entire $8.9 million, then deducted the same 30% from the amounts he paid each of the players with whom he'd swapped action.)

Yet the nature of the grind houses themselves likely wasn't lost on the Canadian tax authorities. Typically used by groups of players to play high volumes on online sites, numerous such grind houses popped up in Montreal, Toronto, and elsewhere around the world. Many of them were populated with American online pros who wished to continue grinding on online sites in the wake of the 2006 implementation of the U.S.'s UIGEA (Unlawful Internet Gambling Enforcement Act), and later, the U.S.'s 2011 "Black Friday" crackdown against the largest remaining US-facing sites.

Duhamel's claims of not being a pro player were further complicated by his own statements in stories like one published by the Toronto Star immediately following his 2010 win. The story described Duhamel as, "A math whiz and an avid reader of poker books, he had dropped out of a finance degree at the University of Quebec at Montreal at 19 to pursue his passion. He spends hours upon hours a week playing online poker.

Duhamel acknowledged the 30% withholding that the U.S., via Caesars and the WSOP, took right off the top. When asked about the tax hit, he said, "It’s 30 per cent withholding tax they take for Canadian players. It’s a big hit. But I knew that before the tournament. It’s part of the game. But I’m still happy. They didn’t take 30 per cent of the bracelet."

He also noted at that time that both luck and skill played roles. When asked which was more important, he said, "It depends if you’re talking short-term or long. Both are involved. The more you practise the better you are going to be. It’s just like a hockey player or a golf player. But if you’re not lucky you’re not going to win. So you need to have both in poker tournaments to pull off a big one."

Judgment in tax case remains to be unsealed

Though the live-testimony phase of Duhamel's tax case has concluded, the final judgment remains under wraps. The case's online docket shows a jumble of activity since the live hearing began at the start of November. The Canada Tax Court does not attach full court documents to its online case dockets, but a few recent docket entries help frame recent activity in Duhamel's matter:

  • 2021-11-01 - Adj. at hearing - Sine die
  • 2021-11-01 - Minutes of Hearing and Exhibit list
  • 2021-11-01 - Partial Consent to Judgment received

These entries appear to show that the hearing was adjourned and an initial judgment issued on November 1. The "partial consent to judgment" would have been filed by the appellant (Duhamel) and received by the court itself, indicating that some of the judgment was accepted while other matters remained in dispute and required further hearings. ("Sine die" means the hearing was adjourned without a continuation date being immediately set, even if that occurred shortly thereafter.) The case stayed busy in the following weeks:

  • 2021-11-03 - Miscellaneous
  • 2021-11-03 - Miscellaneous - Letter Sent
  • 2021-11-03 - Confirmation of Interpreter Services
  • 2021-11-04 - Request for transcript
  • 2021-11-04 - Confirmation of Interpreter Services
  • 2021-11-05 - Continuation of Appeal scheduled
  • 2021-11-08 - Order Hearing Fixed
  • 2021-11-08 - Order hearing fixed sent
  • 2021-11-09 - Conference Call - memo
  • 2021-11-09 - Confirmation of Interpreter Services
  • 2021-11-12 - Transcript
  • 2021-11-12 - E-mail delivery status
  • 2021-11-12 - E-mail delivery status
  • 2021-11-15 - Memorandum
  • 2021-11-15 - E-mail delivery status
  • 2021-11-18 - Position/Response from appellant
  • 2021-11-18 - Request for photocopies of pleadings and other
  • 2021-11-19 - Adj. prior to hearing - Sine die
  • 2021-11-19 - Confirmation of Interpreter Services
  • 2021-11-23 - Request for transcript
  • 2021-11-23 - Conference Call - memo
  • 2021-11-24 - Appeal Scheduled
  • 2021-11-26 - Adj. at hearing - Sine die
  • 2021-11-26 - Transcript
  • 2021-11-26 - Minutes of Hearing and Exhibit list
  • 2021-11-30 - Continuation of Appeal scheduled
  • 2021-11-30 - Conference Call - memo
  • 2021-12-02 - Transcript

It appears (but cannot be confirmed from the socket entries alone) that Duhamel and his counsel filed two separate appeals -- an occurrence that indicates that he lost his arguments in large part as adjudged during the initial live hearing. Those subsequent appeals were scheduled, delayed, and rescheduled throughout November and into December as both sides sought transcripts and filed memos for the court to consider. That led to the latest hearing in the case, which was held on December 14, and in which the judge's decision remains reserved:

  • 2021-12-07 - Order Hearing Fixed
  • 2021-12-07 - Order hearing fixed sent
  • 2021-12-08 - Submissions - Appellant
  • 2021-12-08 - Appellant's authorities
  • 2021-12-08 - Miscellaneous
  • 2021-12-08 - Submissions - Respondent
  • 2021-12-08 - Respondent's authorities
  • 2021-12-08 - Change status to Scheduled
  • 2021-12-08 - Memorandum
  • 2021-12-10 - Miscellaneous - Letter Sent
  • 2021-12-10 - E-mail delivery status
  • 2021-12-10 - Change status to Scheduled
  • 2021-12-14 - Reserved Decision at Hearing
  • 2021-12-15 - Request for transcript (In Court)
  • 2021-12-15 - Minutes of Hearing
  • 2021-12-15 - Transcript (Request for transcript)
  • 2021-12-23 - Transcript

Duhamel also testified that he largely gave up playing online poker by 2015, and he currently lives off investment income generated from his giant 2010 win. His last live cashes occurred in 2018.

The CRA tax ruling isn't the only potential hit for Duhamel. Should the reserved decision come down against Duhamel, he may then also face another million-dollar assessment from his home-province tax authorities, Revenu Québec.

Featured image source: WSOP.com