The Worst Gold Advice You’ll Ever Get
- Details
- Category: Global Perspectives
- Published on Tuesday, 13 December 2011 13:04
- Written by Kevin Brekke
A few weeks ago, a member sent a question asking whether one can get away with declaring gold coins at the border based on face value instead of intrinsic - the idea being to avoid reporting requirements.
While a nice thought that one could be allowed to "outsmart" government officials, it's also a very dangerous one, as Kevin Brekke explains...
Legal Tender Gold: Face Value or Intrinsic Value?
A popular topic on forums sympathetic to personal ownership of gold bullion is the debate surrounding how to value certain gold coins. After all, in 1985 congress passed the Gold Bullion Coin Act that required the US government to mint and place in circulation gold coins. The coins were to be struck from 91.67% pure gold (22 karat) and minted in denominations of $5, $10, $25 and $50. The act was passed pursuant to Article I, Section 8, Clause 5 of the United States Constitution giving Congress the exclusive power to coin money and set its value.
The act allowed American's to escape a currency system then monopolized by Federal Reserve notes. The act also spurred much conjecture about how, exactly, should the value of legal tender US gold coins be determined when the coins are used as a means of exchange.
More specifically, if wages are paid in legal tender US gold coins, how should the employer calculate and report the wages paid: using the face value of the gold coins, or, the intrinsic value of the gold coins?
That question was settled several years ago in a high-profile court case. Let's briefly review the sequence of events that handed the IRS one of its most coveted legal victories.
In May 2003, the offices of Robert Kahre were raided by armed government agents. Robert Kahre and two dozen of his employees were handcuffed and charged, among other alleged offenses, with tax fraud.
A Nevada businessman, Robert Kahre had been paying his employees with legal tender US gold coins and reporting employee wages to the IRS based on the face value of the coins. Kahre had been doing this for seven years at the time of his arrest, and had assisted 35 other contracting companies to do the same.
No surprise, then, that the IRS did not look sympathetically on this practice, and even less so on it being adopted by a spreading core of converts. In April 2005, the Department of Justice (DOJ) indicated its intent to prosecute the case by issuing formal indictments.
The trial began in May 2007 with Kahre facing 109 counts of criminal tax-related charges and conspiracy. In total, nine defendants stood trial on 161 charges.
On September 17, 2007, and to the disbelief of the IRS and DOJ, the case ended with zero convictions. In post-trial statements from jurors, many said that the government had failed to prove that the defendants had acted to intentionally violate tax laws.
But the champagne fizz and euphoria did not last long. In May 2009, Kahre once again stood before a jury of his peers in a second trial. Three months later, on August 14, 2009, Kahre and three other defendants were found guilty of several felony tax crimes, including conspiracy to defraud the IRS and tax evasion.
The details of this case are informative and deserve a more thorough review than can be presented in this space. If interested, Google "Robert Kahre" and you will get sufficient hits to fill your weekend reading list.
It's worth mentioning that Kahre and his defense team cited all the usual case history and constitutional evidence upon which their arguments where based, and much of it will no doubt be familiar to many readers. In spite of the case's outcome and the precedent it sets, there remains ongoing debate in the blogosphere about valuing a legal tender US gold coin in certain instances.
Recently, a blogger running a pro-gold oriented site posted an article that suggested using the face value of a legal tender US gold coin to skirt the reporting requirements of FinCEN Form 105.
Very, very bad advice.
Anyone who has traveled internationally will likely be familiar with the requirements of this form. Filed with the US Treasury, Form 105, Report of International Transportation of Currency or Monetary Instruments, must be filed by persons who:
(1) physically transports, mails, or ships, or causes to be physically transported, mailed, or shipped currency or other monetary instruments in an aggregate amount exceeding $10,000 at one time from the United States to any place outside the United States or into the United States from any place outside the United States, and
(2) receives in the United States currency or other monetary instruments in an aggregate amount exceeding $10,000 at one time which have been transported, mailed, or shipped to the person from any place outside the United States.
A question asking a passenger if they are bringing over $10,000 in monetary instruments into the US appears on the customs and immigration form required for entry. FinCen Form 105 must be submitted when leaving the country and transporting over $10,000.
An attempt to transport legal tender US gold coins into or out of the US with a market value that exceeds the $10,000 limit, without submitting Form 105 and then subsequently being discovered will have seriously unpleasant consequences, the first being that the gold will be confiscated with zero chance of recovery. Fines are likely. Denied entry into the country has happened. And criminal prosecution is always a possibility.
A "face-value" defense is sure to give everyone a good laugh as you wave bye-bye to your bullion.
Don't end up like Robert Kahre. No matter how offensive or intrusive they may be, always follow IRS and Treasury reporting requirements. And when in doubt about the requirements, file. The only way to win in this war on financial privacy is to keep what you have and survive to fight the good fight.
[Of course, if you do decide to make the wise decision of moving a portion of your precious metal holdings overseas, you need to find the right storage facility. Arguably, the premier place in the world to do so is at Das Safe, in Vienna, Austria. In one of our recent reports, we paid a personal visit to the facility and collected the facts you need to determine if it’s right for you. Download the free report here.]
PLEASE NOTE: The information contained within this article is based on the best research we could find as of the date of publication. However, the world changes fast and information can become out of date relatively quickly. So, two points... First, before undertaking any action described in this material, please conduct your own due diligence and verify all facts. Second, if you happen to spot an out of date fact or figure (or even suspect something is out of date or false), simply get in touch with us and we'll look into it. International Man is a network made up of some very smart people - tax specialists, accountants, lawyers, analysts and many other talented individuals. As a group, we can create and maintain a very accurate and highly actionable resource for internationalization.
Chris
Posted at 2011-12-13 21:23:16
This article discusses a tax fraud case and then draws the conclusion that customs will act the same. This conclusion is wrong. I wrote to customs (CBP INFO Centercourse, as things deteriorate in this country that position might change.
James Palmer
Posted at 2011-12-13 23:22:47
"It is dangerous to be right in matters
on which the established authorities are wrong."
U.S. LAW ALLOWS 6.5 oz. of gold to be transported accross the U.S. border. That is approximately $11,050. @ 1700 an oz. It seems one would be safe with only five coins and no other cash (ya know, the papper funny kind). I noticed also that it said U.S. Currency, which indicates to me that other Nations gold coins may be exempt?
No matter what is true all who transport are in jepordy! Welcome to the "world we don't chose."
we not rich
Posted at 2011-12-13 23:54:23
U.S. LAW ALLOWS 6.5 oz. of gold to be transported accross the U.S. border. That is approximately $11,050. @ 1700 an oz. It seems one would be safe with only five coins and no other cash (ya know, the papper funny kind). I noticed also that it said U.S. Currency, which indicates to me that other Nations gold coins may be exempt?
One should not read into form 105 that which is not there. It is a fact that $10,000 is the value of 200 1 oz. gold eagles. It is also a fact that gold eagles are legal tender(the US mint says so). It is also possible and probable that the US government will ignore any laws it creates.James Palmer
Posted at 2011-12-14 02:24:27
U.S. LAW ALLOWS 6.5 oz. of gold to be transported accross the U.S. border. That is approximately $11,050. @ 1700 an oz. It seems one would be safe with only five coins and no other cash (ya know, the papper funny kind). I noticed also that it said U.S. Currency, which indicates to me that other Nations gold coins may be exempt?One should not read into form 105 that which is not there. It is a fact that $10,000 is the value of 200 1 oz. gold eagles. It is also a fact that gold eagles are legal tender(the US mint says so). It is also possible and probable that the US government will ignore any laws it creates. IMAGINE THAT : - )
Ed
Posted at 2011-12-16 14:18:14
How is it that the I.R.S. can work off of the intrinsic value of gold coins minted by the Treasury but not the intrinsic value of Federal Reserve Notes? Also, would one be able to assume that if you were paid in quarters that you could declare only the intrinsic value? I realiseof course, that this is not practical.
Craig
Posted at 2011-12-16 14:47:36
I realize that discussing the US Constitution is a pointless exercise since it is a dead letter. But the following is false.
"The act was passed pursuant to Article I, Section 8, Clause 5 of the United States Constitution giving Congress the exclusive power to coin money and set its value."
The Congress is not given an EXCLUSIVE power. It is allowed to coin money in contrast to the states who are (elsewhere) prohibited from doing so. But private coining of money is a residual right, not prohibited, and took place without incident prior to the Civil War. There were famous, large, long operating private mints in the Carolinas, Denver, San Francisco and other places.
Nor is Congress given the power to "set" the value of money (as in arbitrarily fix the number of dollars any token in worth). It is given the power to "regulate the value thereof". 200 years ago "regulate" did not mean set. It meant "make regular"; that is, to determine uniform standards of weight, composition etc. for the coins the government produced.
Furthermore, the Constitution does NOT give the Federal Government any authority whatsoever to determine legal tender and therefore by the 10th Amendment it has no such power. In contrast, the Constitution explicitely acknowledges that the States have such a power (by imposing limits on same).Posted at 2011-12-16 16:17:43
I realize that discussing the US Constitution is a pointless exercise since it is a dead letter. But the following is false."The act was passed pursuant to Article I, Section 8, Clause 5 of the United States Constitution giving Congress the exclusive power to coin money and set its value."The Congress is not given an EXCLUSIVE power. It is allowed to coin money in contrast to the states who are (elsewhere) prohibited from doing so. But private coining of money is a residual right, not prohibited, and took place without incident prior to the Civil War. There were famous, large, long operating private mints in the Carolinas, Denver, San Francisco and other places.Nor is Congress given the power to "set" the value of money (as in arbitrarily fix the number of dollars any token in worth). It is given the power to "regulate the value thereof". 200 years ago "regulate" did not mean set. It meant "make regular"; that is, to determine uniform standards of weight, composition etc. for the coins the government produced.Furthermore, the Constitution does NOT give the Federal Government any authority whatsoever to determine legal tender and therefore by the 10th Amendment it has no such power. In contrast, the Constitution explicitely acknowledges that the States have such a power (by imposing limits on same).
(YOU MAKE A WELL INTENDED STATEMENT)
However, the Law is never a dead letter, even when as now the powers in Washington ignore it! Consequences always follow the violation of laws that are God given, which the Constitution states as "inalienable rights" and the US Constitution either by wit or inspiration just happened to get right.
The US economy is in shambels because certain monetary principles have for some time been ignored and violated. The results are upon us, as in, violating the sanctity of life and then having a body to dispose of. The Abortion of the Constitution has been one and the same as any other denial of "God given rights" that evil men in Washington or Moscow deprive the populace of.
The loss (in affect) of the Nations Bill of Rights under a Congress and WH steeped in the violation of their oath of office is equal and destined to result in a similar outcome of ancient Israel forsaking their law, which resulted in rejecting the Author of mankinds salvation! Every violation recieves a just recompense, ours is near.
Doug Spooner
Posted at 2011-12-17 01:12:06
Would this have happened if he had paid employees with pre-1965 silver coins or is he only in trouble because he used gold bullion instead?
we not rich
Posted at 2011-12-13 18:15:16
Regarding form 105 and #1, #2 the language used is "aggregate". Aggregate does not translate to "market" value.
International man author misrepresents the meaning of 105 by stating, "An attempt to transport legal tender US gold coins into or out of the US with a market value that exceeds the $10,000 limit..."
105 does not express "market value" at all.
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