IRS delivers stunning
reversal on the American Gold Eagle / Income Tax Question
March 22, 2008 – Earlier this month
the Muckraker Report published an article titled American Gold Eagle preys upon the IRS. In the article, the question regarding how much income needed to be claimed
on a tax return when a taxpayer received an American Gold Eagle coin as pay for labor / services was examined.
On February
21, 2008, IRS tax assistance representative Bob Knierim told the Muckraker Report that if a taxpayer received a $50 American
Gold Eagle in exchange for labor / services, the taxpayer would be required to claim market value of the coin rather
than the legal tender value of $50. Market value of gold changes daily. The market value of a $50 American Gold Eagle is approximately $920 today. A few weeks ago it was over $1000.
Knierim was wrong.
It should
be noted that if a $50 American Gold Eagle is presented to a clerk at a convenience store for the purchase of $20 worth of
goods, legal tender laws dictate that the clerk deliver $30 in change, and not change based on the market value of the coin.
In preparation for
the American Gold Eagle preys upon the IRS story, the Muckraker Report sent a question via e-mail to the IRS through its online Tax Help resource. After a few days of waiting for a response, an e-mail from the IRS was received in
which it indicated that due to the difficultly of the question, the IRS would require additional time to research before providing
an answer. Facing a deadline, the Muckraker Report called the Tax Help resource
and was able to get Bob Knierim on the record for the previous article. However,
on March 8, 2008 the IRS finally was able to provide an e-mail response and answer to this question:
If I received
a $50 American Gold Eagle (legal tender) as a wage, would I need to claim $50 on my tax return or the market value? Today, the $50 American Gold Eagle was selling for approximately $980.00.
The IRS wrote:
You will
only be reporting your wages of $50. The American Gold Eagle is now your capital
asset (collectible), and any gain or loss on the coin will not be reported as income or loss until you dispose of the coin.
(Scan
of actual IRS e-mail response is located at the end of this article)
While the
Muckraker Report disagrees with the IRS claim that the coin ‘now’ becomes a collectible any more than a penny,
nickel, dime, or quarter, after all, the American Gold Eagle is a circulating coin and legal tender; the fact that taxpayers
are only required to claim $50 as income on it opens up significant opportunities for those who find the federal income tax
repugnant, unlawful, and unconstitutional to avoid paying as much, if any federal income tax.
As for the
capital gain tax exposure, if the taxpayer makes arrangements to have a portion or all of his or her pay made in American
Gold Eagles and holds the coins as long-term savings, for all practical and legal purposes, the taxpayer can avoid paying
any tax on that portion of his or her wages.
It also creates
the opportunity for those that think the Social Security tax is repugnant, unlawful, and unconstitutional to pay much less
if any at all. Social Security tax is pegged at approximately 15% for most middle
class wage earners on a payroll. The employer pays approximately 7.5% and 7.5%
comes out of the employee paycheck. The percentage is based on gross income. The self-employed are required to pay 15.3% towards Social Security.
If a payroll
taxpayer earns $50 thousand annually, the taxpayer is taxed approximately $3750 per year for Social Security. The employer is required to pay the remaining $3750 on behalf of the employee. However, if that same taxpayer had been paid in $50 American Gold Eagles, considering the market value
of the coin to be $1000 per piece, for income tax purposes there would be no income tax requirement whatsoever because
of the minimal earnings, and little if any Social Security tax burden.
An annual
salary of $50 thousand equates to $2.5 thousand if paid in $50 American Gold Eagles, if the market value is $1000 for each
coin. Imagine the withholding savings!
Clearly, the
opportunities to legally avoid federal tax – social and income, socialists and big federal government supporters
call these opportunities tax loopholes, versus being criminally charged with tax evasion, are abundant simply by receiving
and holding American Gold Eagles. This approach just might be a legal way for
Americans firmly grounded in the U.S. Constitution’s original intent to no longer fund creeping fascism, tyranny, and
imperialism at the fraudulent, corporate federal level.
There are
potential downsides to be considered. Employers will have the issue of minimum
wage laws to overcome. Both employers and the self-employed will have the risk
of the value of gold plummeted because of Federal Reserve manipulation of the stock market, money supply, and interest rates,
in additional to bailouts and constant gross intrusions upon free market fluctuations – all the more reason to immediately
abolish the Federal Reserve System, allow the banks that should fail, to fail, and build anew, a monetary system based upon
gold or silver.
Few employers
will wrap their minds around the benefits of the American Gold Eagle. However,
for the self-employed with patriotic workers and patriotic customers, the opportunity to exchange labor / services for American
Gold Eagles now exists with a clear tax burden reducing benefit to consider. For
the right Americans in the right situations, this appears to be a tax-reducing breakthrough that is not an illegal tax scheme.
On a final
note, capital gains may be taxed at 5, 15, 25 or 28 percent, or a combination of rates.
The taxpayer's income level generally determines which capital gains rate is owed. If paid in $50 American Gold Eagles, a $50 thousand salary, based on the market value of the coins being
$1000, equates to an income level of $2500 annually. Consequently, the capital
gains tax would, in most circumstances, be an amount much less than the combined federal income tax and social security withholding.
