Using legal tender gold and silver coins to reduce income by 1/16th

irvinefsbo_IHB

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<p>awgee:</p>

<p>What is your take on this Robert Kahre victory? Can you really pay someone $599 silver dollars worth $9584 market value and not issue a 1099?</p>

<p><a href="http://www.lvrj.com/news/9893062.html">http://www.lvrj.com/news/9893062.html</a></p>

<p>Informally called the Kahre case -- after the primary defendant, local business owner <a class="inform_highlight" title="Robert Kahre" href="http://www.inform.com/Robert+Kahre">Robert Kahre</a>, who paid workers in gold and silver coins -- the trial lasted four months. It relied heavily on evidence gathered in a controversial armed raid in May 2003 on several of Kahre's local business places. The raid entailed keeping more than 20 workers handcuffed, at gunpoint, in 106-degree heat without shade or water while agents collected records and equipment.</p>

<p>"Yeah, that's a pretty major victory," said defense lawyer <a class="inform_highlight" title="William Cohan" href="http://www.inform.com/William+Cohan">William Cohan</a>. "If you go 0 for 160 (in baseball), they'd send you down to the minor leagues."</p>

<p>Cohan was upbeat although his client, Kahre, was not acquitted of any of his 109 charges. Rather, the jury hung on all of Kahre's counts. </p>

<p>The jury also hung on all counts faced by Kahre's sister, Lori Kahre, and defendant Alex Loglia.</p>

<p>Four defendants acquitted of all the charges against them were Axberg, Robert Furman, Ron Ruggles, and Kahre's mother, Myra Buonomo.</p>

<p>"It was the most wonderful feeling and the most wonderful day in ages," Buonomo, 66, said of her acquittal. She said she works "more or less as a runner" for her son's construction-related businesses. Part of the case hinged on whether Kahre's workers were employees or independent contractors, who are responsible for paying their own taxes.</p>

<p>Two other defendants, Dannielle Alires and Debra Rosenbaum, were partly acquitted, with the jury hung on one count each.</p>

<p>Before trial, five additional defendants had pleaded guilty.</p>

<p>Michael Kennedy, who defended Lori Kahre, said the case turned on the notion that taxpayers could be wrong without being criminal. He was referring to the fact that his client, Lori Kahre, and other defendants had not paid taxes according to the market value of the precious metal content of the coins in which they were paid, as opposed to their face value. He conceded at trial that his client may owe federal taxes for her mistakes.</p>

<p>The Internal Revenue Service had never before provided guidance on how to handle gold and silver coins that circulate, only on noncirculating collectible coins, according to Kennedy, who is a federal public defender. "If that's the case, we're not going to take someone's liberty from them, on something that a (certified public accountant) with a master's degree doesn't even know. That's a scary country, and I don't live in that country." </p>
 
My take is that it was very smart for the defense lawyer to have this tried in front of a jury. Other than that, I don't see how tax court, which sets IRS procedures through it's rulings, will let gold and silver "legal tender" coins to be used to legally avoid taxes.
 
<p>The coins have the amount of legal tender stamped on them.... not their intrinsic value for the metal. I would say he paid them well. Its a trick and not in the spirit of the law, so i'm not sure how much longer they will be able to do it.</p>

<p>-bix</p>
 
<p>bix:</p>

<p>I agree it is not in the spirit of the law, and I can just see rich people abusing this loophole.</p>

<p>Let's say I contribute to my self directed Roth IRA, not $4000 in dollar bills, but $4000 in silver legal tender $1 coins (market value $64K). I wait the requisite 5 years or until I'm 55 and take the coins out. Even if the coins didn't appreciate at all during the next 5 years (highly unlikely), I now have $64K tax free.</p>

<p>How can IRS stop it? print legal tender amounts comparable to its market value? That is only going to make older coins with lower legal tender amounts more valuable. Print legal tender amounts in excess of its metal value? Then people will really use the coin to pay debts! </p>

<p> </p>

<p> </p>
 
<p>FSBO, </p>

<p>My guess is they will add a clause that will be something like ,"intrensic value" or use precious metal resources as "bartered value". Then the cost of thigns will go WAY up. Good luck</p>

<p>-bix</p>
 
irvinefsbo - I really like your Roth scenario. Seriously, I was trying to think of a better use for this gold and silver legal tender issue than just avoiding 1099s, and your idea is wonderful. I think there is one descrepancy in your thesis. I don't think the original $64k is tax free, because you had to "purchase" the silver coins for $64k in the first place and that purchase is done with $64k of after tax dollars. But, what I like about your idea is being able to put $64k, (or the value of $4000 in silver coins), in a Roth every year instead of $4000. That would be incredible in and of itself. And what of the gift tax and estate tax implications? Can one gift $11,000 of gold legal tender coins? A one ounce American gold eagle has "$50 legal tender" stamped on it. Now this would be a true loop hole. The possibilites?
 
I would love to see the IRS simultaneously declare legal tender worth more than it's stamped value as a commodity and yet preserve it's legal status as currency. Isn't this the real reason FDR outlawed gold ownership during the depression?
 
Wow. This brings up some interesting questions. You guys are bright.<p>


Does the IRS have the power to declare legal tender as being worth more than the amount stamped? I wouldn't think so, but ...<p>


Will the US mint now have to manufacture pm coins with an amount stamped on them? And what are the implications of that?<p>


Persoanally, I would like more folks to hear about this and ask questions. The main question being, "What is money?"
 
Nude - I think the reason FDR outlawed the possession of large quantities of gold during the depression was to enable the Fed the print money and loan it to the US federal government.
 
<p>awgee:</p>

<p>Upon further research the Roth or traditional IRA won't work. IRS specifically prohibit you puting your own purchased coins in the IRA, has to be purchased by the trustee with your $. Unless you can figure out some other way? </p>

<p>But gift tax exclusions should work really well. $11K of legal tender = $176K bills. However, I don't know of anyone who ever declares any gift of $11K.</p>

<p>Think of this, if you are one of the few that actually has over $250K gain or $500K for your home and are selling now. Take the money above the mortgage in legal tender coins. You just dropped your gain by 1/16th. Talk about real estate crash! Think of the property taxes the new buyers will save! Your new neighbors are just going to love the comp. I'm sure the fed and state of CA is just going to love this also.</p>
 
It is not necessary to declare a gift of less than $11,000. So, you could gift $10,000 in gold coins and still be under the declareable limit?
 
<p>nude:</p>

<p>If enough people do this, IRS will be so swamped! Remember the Kahre case was filed in 2003, and just finished trial in 2007. No wonder there is media blackout on this case!</p>

<p>The only way to stop it is to appreciate the $ to match the silver coin.</p>
 
<p><em>Nude - I think the reason FDR outlawed the possession of large quantities of gold during the depression was to enable the Fed the print money and loan it to the US federal government.</em></p>

<p>Right. And not having private stashes of gold allowed the artificial valuation of that currecy to be whatever was needed at the time to keep the New Deal programs, and later war spending, in the black. My point is that it wouldn't have been possible to do any of that if the population at large still had access to metal currency who raw value was suddenly much higher than it's stamped value; I think the disparity in values between printed and metal currency would have shoved us back into the financial stone age of barter and trade. </p>
 
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