You are one of the winners in a casino drawing. This time, there were actually eleven winners. Ten of you will get $500 and one of you will get $10,000. All prizes are in cash.<\/p>\n\n\n\n
Nine people have already made their selections — and all have picked $500 — many of them showing their disappointment. There are only two cards left. One for $500 and one for $10,000. You know the other winner and he leans over and asks if you want to make a save.<\/p>\n\n\n\n
\u201cWhat do you have in mind?\u201d you ask.<\/p>\n\n\n\n
\u201cThe guy who wins the big prize gives the other guy $3,000,\u201d comes the reply.<\/p>\n\n\n\n
So. Do you make this deal? <\/p>\n\n\n\n
There are lots of different ways the save could have been structured. Through the years, I\u2019ve been in this situation perhaps a dozen times. Sometimes I\u2019ve taken the deal and sometimes I haven\u2019t. Sometimes I\u2019ve been the one suggesting the split. I\u2019ve also witnessed others make this type of deal dozens of<\/s> more times. Today I want to discuss what would make me say yes and what would make me say no.<\/p>\n\n\n\n
Saves in general are a way to lower variance without affecting your expected win — this time changing the prize structure from $10,000 – $500, to $7,000 – $3,500. This is a preferable split to most players. But you need to be careful. <\/p>\n\n\n\n
Here we\u2019re assuming there are two players with equal chances. Tournament poker players sometimes use a so-called \u201cIndependent Chip Model\u201d to deal with any number of players, each with different chip stacks. That\u2019s way beyond what we\u2019re discussing today. <\/p>\n\n\n\n
First of all, do I trust the other guy? If the answer is no, I\u2019ll decline the deal. If I\u2019ve heard anything suggesting he\u2019s not honorable, that\u2019s a showstopper. A situation where I pay him $3,000 half the time but he reneges the other half is a lousy position to be in. If I\u2019ve never seen this guy before, my default reaction is not to split. <\/p>\n\n\n\n
Second, what about taxes? The one who collects $10,000 is going to receive a Form 1099 from the casino for that amount, meaning the IRS is going to want its share. Possibly the $500 winner will receive a 1099 too, depending on the casino. In today\u2019s discussion, we\u2019ll ignore whether the $500 winner will receive a 1099 from the casino.<\/p>\n\n\n\n
The two most-common ways to handle taxes are for the winner to eat them all, or for the winner issue his own Form 1099 to the other guy. I can live with it either way, but I need to know in advance. <\/p>\n\n\n\n
Lastly, and this isn\u2019t always possible, I want a witness we both know and trust. If this is a weekly drawing at a local casino and both of us regularly enter the drawing, there are likely several others we know and trust to be a witness. If this is a drawing at a casino where neither of us have won before, finding that trusted third party will be tougher. One or both of you may know nobody else there. In this situation, I probably won\u2019t know the other winner either and so my solution would be to skip the save.<\/p>\n\n\n\n
There will not be time for a written agreement — signed and notarized. You\u2019re going to have to go with a handshake deal. (Whether there\u2019s a physical handshake or not is immaterial to the agreement between you being valid — but one or both of you might feel better if you actually do it.) <\/p>\n\n\n\n
One time I got burned on this. The other guy\u2019s wife got involved after the fact and vetoed the deal. She was adamant and a big scene in the casino would have had bad repercussions. I choose to believe that the guy made an honorable agreement and his wife came in and interfered. It\u2019s possible, I suppose, that they regularly pull this as a sort of scam. Two years later the same guy invited me to split, and I declined.<\/p>\n\n\n\n
That\u2019s it. Congratulations on making it this far in the drawing! Hopefully, whether you\u2019ve agreed to a split or not, you win the big prize!<\/p>\n","protected":false},"excerpt":{"rendered":"
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