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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:
- 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
- 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.
Reprinted from International Man with permission.