Capital idea
Les Jones on the story behind the subpoena for anonymous posters:
The case involved Robert Kahre, a Las Vegas businessman who paid his contract employees in gold and silver U.S. coins. The employees then paid taxes based on the face value of the coins, rather than their much greater worth as bullion. The difference can be considerable. A $50 U.S. gold coin contains one troy ounce of gold, which currently fetches over $900.
The IRS sued Kahre and some of his contract employees, essentially claiming that taxes should be based on the actual value of the coins, rather than their face value. Which tends to raise an obvious question. A $50 bill has a real value of essentially nothing since it’s only good for lining a bird cage, so can I get paid in $50 bills and not owe any taxes?
June 19th, 2009 at 11:09 am
Heh!
I love tax protesters. They are teh funny. Will these guys be paying their lawyers’, let’s say $300.00/hr fee, with six $50.00 gold coins?
June 19th, 2009 at 12:08 pm
Wow. I searched a bit and I don’t even know where to start hunting for a legal definition of the declared value of legal tender bullion coin.
I’d think if it’s actually legal tender it has to be rendered at the declared face value… the US Mint put that there for a reason regardless of the substrate, and this is the inverse side problem of having a fiat currency. But, for only as long as it’s HELD… I’d think if it’s ever converted into useable funds, you’d have to declare that as income… an appreciation on an investment.
God, what a sticky problem.
June 19th, 2009 at 12:20 pm
Allright. Was Kahre paying his employees at the face value of the golf and silver coins? Man, I sure would like to go to work for him, then.
If not, he can also face violations of the minimum wage law.
Like I said, tax protesters are teh funny. Basically, they are not very smart. If they were, they would make enough money for themselves and the government too.
June 19th, 2009 at 12:24 pm
Actually, I find them to be very smart in that creative sort of way. Just not smart in that ‘maybe i should do some research and call a lawyer’ way.
June 19th, 2009 at 12:37 pm
Being the value was set when the money was created at $50.00 you would think it would still be worth $50.00. But alas our tax code is so complicated right now that you can find a loophole for anything in it and when you use it the IRS will find another law to nail you to the wall with.
I’m guessing they are going to claim the employees will melt down the money and sell the raw materials, which they very well could. But that is also illegal since it would be destruction of currency which has been illegal at least as long as the material to make pennies has been worth more than a penny.
June 19th, 2009 at 12:48 pm
If I were an Assistant United States Attorney, I would bring a concurrent action, to take the coins, under Fifth Amendment eminent domain, paying them Fifth Amendment “just compensation” at face value. Just for the fun of it.
June 19th, 2009 at 2:06 pm
Does that mean I have to separate my pre-82 and post-82 pennies, and report a value of 1.5 cents per pre-82 penny?
(See here. though I’ve seen it as high as 1.9 cents, and as low as 0.95 cents, in the past 18 months.)
Wait a minute…do I report the value of such pennies on the date of filing, or their value when given to me?
June 19th, 2009 at 3:46 pm
I think the IRS rule for criminal evasion is if the unreported income exceeds 20% of your total income.
June 19th, 2009 at 9:31 pm
I would think that the coin would be self-authenticating as to being worth its face value or else, as pointed out above, paper money is worthless. A rare nickel might be worth hundreds of dollars, but if you put it in a parking meter you still only get six minutes of time.
One thing these guys could do is to take a vacation to some place with Swiss-style banking laws, melt the gold down, sell it for its metal value, then deposit the rest in the off-shore account. The eminent domain idea is interesting, but I don’t know how you’d pull it off. You’d have to know for sure how many of these coins a person has, then get a search warrant if they said they’d spent them all. I’m not too sure that search warrant would fly.
June 19th, 2009 at 10:30 pm
One note about “off-shore accounts”. It is *very* difficult to get an osa as a US citizen now. Mostly the anti-terror / financing and the anti-gambling laws have made the first question these places ask; “Do you have US Citizenship?” If so, they hang up on you. Really.
As for this guy’s situation – it really comes down to their ability to prove his intent to avoid income taxes – both him paying them and his contractors. If the IRS can show that he used these coins in lieu of “normal” pay methods in order to circumvent taxes, he’s toast.
He’s probably created a lot of extra work for himself, but I’ve had clients who do hundreds of hours of extra work each year to do things like this. Why? Because to them, “winning” against the IRS is “fun”. Structuring their business to frustrate an IRS auditor is something they consider a hobby – like a bird feeder, race car, or blogging. They *loved* showing off the documents proving they “beat” the IRS. The cost wasn’t really a factor for them.
To each, their own, I guess.
June 20th, 2009 at 4:53 pm
Finally, a short explanation of what that case was all about. And the penny analogy seems to work too. As for pissing on the IRS no matter what — A business owner I knew would always write the check to them for one dollar over then request the reimbursement check for that overage. It was legal and the IRS would easily lose money in the transaction(s), (postage, man-hours). Seems like if everyone did that… 🙂
June 22nd, 2009 at 3:21 pm
Seems the answer here is pretty simple. The payment on his side is perfectly legal, and his contractors have acquired a bunch of gold and silver coins with a cost basis equal to their face value. As long as they hold the coins, they’re fine. When they sell them they’re liable for the appreciation just like any collectible. You’re not circumventing taxes, just delaying them.