IRS legally kicked in the gonads...

[Warren]

Very long article but worth it. 

http://www.liberty-watch.com/volume03/issue08/coverstory.php


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[RevDisk]

Very long article but worth it. 

http://www.liberty-watch.com/volume03/issue08/coverstory.php

I'd rather have the mafia angry at me than the IRS.  The mafia at least has an ounce of humor.  IRS, man...   Ever SEEN a complete copy of the tax code?  Takes up a good sized room.

[charby]

Very long article but worth it. 

http://www.liberty-watch.com/volume03/issue08/coverstory.php

I'd rather have the mafia angry at me than the IRS.  The mafia at least has an ounce of humor.  IRS, man...   Ever SEEN a complete copy of the tax code?  Takes up a good sized room.

You could keep warm all winter by burning one copy of the tax code in your wood stove.

[Manedwolf]

What happens if you annoy the IRS... 

[roo_ster]

The IRS ought to be kicked in the jimmy early and often.

Wouldn't it be interesting if the hard currency monetary system crowded out the fiat currentcy system?

[BrokenPaw]

The IRS ought to be kicked in the jimmy early and often.

Wouldn't it be interesting if the hard currency monetary system crowded out the fiat currentcy system?

This is a beautiful case, because it's lose-lose for the IRS; either they argue that money has value equal to its face value, in which case a $1 bill is taxable at one dollar, and a $50 gold coin is taxable at $50, and they lose their arguing position in this case, or:  they argue that face value is irrelevant, and that intrinsic value is what is important, in which case the whole taxation system falls apart, because the intrinsic value of the greenback is negligible.

Interesting side note:  Could one use this ruling as a way to play games with investments?  Suppose I spent $806 to purchase a 1-ounce gold coin with a face value of $50; could I then use the face value of the coin to justify that as a $756 loss on investment, and use that loss to offset gains elsewhere?

-BP

[Brad Johnson]

What about the guy a few months ago that caught the record home run ball?  The IRS was going to whop him with taxes for over half a mil just because that's what they thought the ball was going to be worth if it was ever sold.

Brad

[Len Budney]

What about the guy a few months ago that caught the record home run ball?  The IRS was going to whop him with taxes for over half a mil just because that's what they thought the ball was going to be worth if it was ever sold.

That's right up there with assessing property tax on folks' real estate in Second Life.

--Len.

[Brad Johnson]

With real estate at least there is a comparable product and market history to use for comparison. 

With that ball, however, there was no market comparison.  The only way to establish the value of the ball was to sell it.  Unless the ball - that specific ball - was sold, there was no reasonable way to judge market value.  Until that time, the ball was worth exactly the purchase price paid for it before it was swatted across the outfield and into history.

Brad

[charby]

Interesting side note:  Could one use this ruling as a way to play games with investments?  Suppose I spent $806 to purchase a 1-ounce gold coin with a face value of $50; could I then use the face value of the coin to justify that as a $756 loss on investment, and use that loss to offset gains elsewhere?

-BP

I could buy a handful and have my tax billed cleared via losses..  Sweet I tell ya.  There needs to be Family Guy episode written about that.

-C

[tyme]

With real estate at least there is a comparable product and market history to use for comparison.

With that ball, however, there was no market comparison.  The only way to establish the value of the ball was to sell it.  Unless the ball - that specific ball - was sold, there was no reasonable way to judge market value.  Until that time, the ball was worth exactly the purchase price paid for it before it was swatted across the outfield and into history.

Are you saying that there's some arbitrary line drawn on the liquidity scale, such that more liquid assets are taxable and less liquid assets aren't?

Does the preexisting market (of sufficient size) have to be local?  Do auctions count? (If a fairly similar item is sold at auction in Russia, can that price be used to assess a poor American sap's taxes?)

[SomeKid]

If you had your hands on one of the $50 pieces, how would you turn it into FRN?

[Balog]

Despite the Paulpraganda, that story rocks.

[Brad Johnson]

With real estate at least there is a comparable product and market history to use for comparison.

With that ball, however, there was no market comparison.  The only way to establish the value of the ball was to sell it.  Unless the ball - that specific ball - was sold, there was no reasonable way to judge market value.  Until that time, the ball was worth exactly the purchase price paid for it before it was swatted across the outfield and into history.

Are you saying that there's some arbitrary line drawn on the liquidity scale, such that more liquid assets are taxable and less liquid assets aren't?

Does the preexisting market (of sufficient size) have to be local?  Do auctions count? (If a fairly similar item is sold at auction in Russia, can that price be used to assess a poor American sap's taxes?)

What I was trying to illustrate is that real estate values are (usually) based on a pool of directly comparable properties.  They will be comparable in size, layout, finish, and location.  There is a physical similarity that can be applied, a similarity that includes market value.

The ball, however, is elevated in value only because of an event.  That event is unique.  There is no "comparable event" on which to base a value.  Thus the only way to define the value of the ball is to sell it.  Until sold, the only assignable value will be the price originally paid for the ball in pre-event condition.  The IRS was trying to assign it a value and tax the owner for that value even though the ball had not been sold and no value (other than an arbitrary guess) had been assigned.

Brad

[Euclidean]

Love it.  This is also interesting to me from an academic accounting perspective, in that if it weren't a coin, GAAP would probably dictate you record the book value of the gold as an exception to the cost principle, but since it is legal tender, I'd be really hesistant to call it anything but cash due to the conservation principal.

[Hawkmoon]

What you're all missing is that the coins this guy was using are NOT issued by the United States government. There is a company that puts this stuff out. Their coins are, technically, not "legal tender." There was an article recently (perhaps on The High Road?) about a guy who was arrested for trying to coerce a convenience store into accepting those coins. I'm pretty sure it was the same stuff.

Try a Google on "Liberty Dollar"

It's a scam. It's essentially a sophisticated bartar scheme, and the whole deal is that nobody really knows what they're worth.

Also, although I confess to having scanned the linked article (which is probably a Liberty Dollar plant) rather quickly, where did it actually say he was acquitted? If it said that, I missed it.

[Len Budney]

What you're all missing is that the coins this guy was using are NOT issued by the United States government.

According to TFA, he was using US coins--old gold and silver US coins. What ticked off the IRS was that he would pay an employee $2,600 per year, using gold $50 coins worth a total of over $40K based on their metallic content. It's hard to see how the government gets off complaining about a man using legal tender to pay his employees. He was acquitted in a jury trial.

They might try to nail him again under the minimum wage laws, though. By his own logic, he's only paying his employees $1.25/hr. 

There is a company that puts this stuff out. Their coins are, technically, not "legal tender." ...Try a Google on "Liberty Dollar." It's a scam.

I'm no fan of the liberty dollars. Basically the guy is operating a mint that charges something like 30% seigniorage, which is outrageous--though not technically a scam. I think that they do scam people when they pass their coins, though, because I don't believe that anyone really understands their 30-second blurb they give when trying to use them to pay bills.

--Len.

[CAnnoneer]

Buying the coin for X dollars and treating it as investment means you can subtract X dollars from your income for the year. But, later, when you sell the coin for Y dollars, you will have to declare Y dollars more as income. So, it works out as any investment. Something weird can happen only if somebody is dumb enough to give you the coin for face value, you spend it at face value, or you incorrectly declare income to the IRS.

[Hawkmoon]

The ball, however, is elevated in value only because of an event.  That event is unique.  There is no "comparable event" on which to base a value.  Thus the only way to define the value of the ball is to sell it.  Until sold, the only assignable value will be the price originally paid for the ball in pre-event condition.  The IRS was trying to assign it a value and tax the owner for that value even though the ball had not been sold and no value (other than an arbitrary guess) had been assigned.

Brad

You're right, but it wouldn't matter even if there were a way to establish a "comparable." The guy paid either nothing for the ball, or he paid the price of his ticket to the ball game. One or t'other, that's his "basis" in accounting terms for the baseball.

Taxes should not be imposed unless and until he sells it. At that time, if the current tax system hasn't been overturned by then, he would owe capital gains taxes on the difference between the selling price and the "basis."

[Tuco]

If you had your hands on one of the $50 pieces, how would you turn it into FRN?

Take said gold piece to your local jeweler, or collectibles shop (coins and stamps - look in ye ole yeller pages).
This dude will weigh the coin, and give a roll of greenbacks based on the day's precious metal prices.  If i recall correctly, the coins are minted to a specific weight, so a 50 is valued at ##/100 (0.##) of an ounce.

Be prepared to leave a small percentage of the coin's value based on gold weight in the hands of said money changer. 

[Finch]

Despite the Paulpraganda, that story rocks.

How is this, the only sentance with Ron Paul's name "Paulpraganda"

In 1985, Ron Paul and other congressmen challenged our countrys currency system, which was monopolized by Federal Reserve Notes (FRNs)

Rabid I tell you, rabid....

Anyways, I love how the article refers to the currency as Federal Reserve Notes and not dollars, and also makes mention of Article 1 section 8. Good Stuff.

[Euclidean]

I'm no fan of the liberty dollars. Basically the guy is operating a mint that charges something like 30% seigniorage, which is outrageous--though not technically a scam. I think that they do scam people when they pass their coins, though, because I don't believe that anyone really understands their 30-second blurb they give when trying to use them to pay bills.

--Len.

I'm not going to start buying them either, but I do support what they're trying to do, even though I don't think it will work.  The Liberty Dollar people have always, always emphasized their products are not legal tender, but I don't think that's the point.  I think the point is that the Federal Reserve system is out of control and that consenting adults should be able to exchange anything they want in commerce.  On that end I support them philosophically.

I also question if, in the long term, a currency that's backed by a substance will be viable.  I'm quite aware gold and silver are worth more now than they ever have been, but consider the Twilight Zone scenario where we figure out a way to synthesize an effective substitute for either, and there goes the value.  Our ratty paper greenbacks would work just fine if they'd just stop printing billions more of them every time they felt like it.

[Warren]

Hawkmoon, the Libetry Dollar has nothing to do with this, this is money minted by the US Mint. The case could not have worked if it was a third party currency.

In 1985, Ron Paul and other congressmen challenged our countrys currency system, which was monopolized by Federal Reserve Notes (FRNs)  the familiar greenbacks in American wallets. The congressmen successfully pursued the Gold Bullion Coin Act, which required the U.S. government to mint and place gold coins in denominations of $50, $25, $10 and $5 into circulation based on demand. The coins are made of 91.67 percent pure gold.

There were no, zero, nada convictions but there were several hung charges.

Rather, jurors delivered zero guilty verdicts. Three defendants, all workers, were acquitted as well as Kahres mother, who worked as a runner for her sons businesses. Two other defendants were partly acquitted  the jury hung on one count each. The jury also hung on all counts faced by Kahre, Loglia and Kahres sister, resulting in mistrials.

[tyme]

Brad, I'm just mystified how liquid the market has to be, or how comparable a similar item would have to be, before it can be used by the IRS to determine tax liability.

[atomd]

Has anyone here ever bought/sold American Eagle gold bullion coins? Since they are issued by the mint and contain a precise amount of pure gold, it seems like it would be safe to buy some. I'm not looking to invest or anything like that. I just think it would be kind of neat to have. My only concern is if I wanted to get rid of one, how much would they skim off the top for profit? Hmmmm