Sunday, May 31, 2009

Good as gold?

A 1 oz gold coin issued by the U.S. Mint and decreed by Congress to have a monetary value of $50.00 is the source of an interesting court case in Nevada. Let's assume you have a $50 gold piece and take it to the bank to deposit it. The bank clerk will credit your account for $50 but if you take it down the street to a coin dealer, he will give you about 20-times that amount.

What if you have a construction business and you hire a guy to hang dry wall and pay him in gold coins at a rate of say one gold coin per week and since the worker is an independent contractor as opposed to an employee, you are not required to withhold anything for taxes. Therefore, does the worker owe taxes on $2,600---the face value of his yearly earnings---or something like $50,000? If $2,600, the employee is below the taxable level the government has established for owing income tax. That question is one which should be answered by the IRS when the dry wall guy files his taxes.

Well, as you might imagine, the IRS does not want to worry about individual income tax reports and it is charging the businessman with 57 counts of income tax evasion, tax fraud and criminal conspiracy. If convicted on most counts, he could live out his life in prison. BestView has a problem understanding how the employer is guilty of anything when he uses U.S. coinage as Congress designated it, and if I was on the jury, he would have at least one vote of not guilty.

What if I had a piece of property on the market for $100,000 that I paid $50,000 for and I designated that the buyer close with $2,000 in $50 gold coins---legal tender? Would I have a tax gain on the transaction? One thing I would have is a major problem finding a lawyer to close on the transaction.

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