A Toronto lawyer who left Bay Street in 2006 in an abortive attempt to make it as a professional Internet poker player has failed in a bid to write off the $120,000 loss he ran up that year before slinking back to practice.
Steven A. Cohen claimed he made the career switch in December 2005 after Goodmans LLP deferred a decision on elevating him to partner for a second consecutive year.
His master plan envisioned a $150,000 annual profit by targeting weak, inexperienced players in small-stakes games, before elevating in the long-term to higher stakes for a $500,000 annual return, the same level he would have made as partner at Goodmans, according to the ruling in Cohen v. The Queen.
Instead of just resigning, Cohen stopped taking on new work and passed off files until he was terminated with seven months severance in March 2006, said the ruling.
But things didn’t quite go as planned, and his $80,000 in winnings for 2006 were dwarfed by the $200,000 he ploughed into the venture. Those business expenses included $2,000 for a Las Vegas seminar on poker, $1,000 for travel to tournaments in Vegas, and $500 for articles and books on the game.
In the May 12 ruling, Tax Court of Canada Justice Frank Pizzitelli decided Cohen’s actions did not suggest the poker venture was conducted in a business-like way, and refused Cohen’s appeal of his tax assessment which denied his bid to deduct his $120,000 losses.
“The suggestion he was calculating and disciplined is also questionable. While he may have done the math, as his counsel argued, in knowing the odds of different card hands while playing, this was information available from his materials and capable of being determined by a fourth grader as his material suggests. Moreover, he demonstrated a total lack of discipline by both abandoning his strategy of playing low stakes games against inexperienced players after just three months and by simply increasing his credit card limit from $27,000 to $40,000 when needed,” wrote Pizzitelli.
The decision also delivered a damning verdict on Cohen’s poker skills.
“The fact his initial strategy was to play inexperienced players suggests he himself did not have the superior skills necessary to compete at a higher level that would bring him the $500,000 paycheque he aspired to. The fact he lost money every month, including the first three months he played smaller stakes games, does not even suggest a superior skill set at that level,” Pizzitelli wrote.
Cohen’s claim of professionalism might have had more credibility, according to the judgment, if his own web site did not indicate started his own law firm in March 2006, the same month he left Goodmans.
“I find his explanation for the March 2006 date, which is that he continued to be a member of the Bar during the period notwithstanding that he started a new venture, hence why he used that date on his marketing material, to be unsatisfactory. If that was the intention then why not just say he has been [practising] law since the earlier date he was called to the Bar,” Pizzitelli said.