Talk:Gold Bullion Coin Act of 1985

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Reducing tax liability?

Dear fellow editors: I am not an expert on the Gold Bullion Coin Act of 1985, but this article definitely needs work. For example, it seems to say that a person can reduce some sort of unidentified tax liability by buying certain gold coins. This statement needs to be either sourced or removed. What kind of tax liability? Federal? State? Income tax? Gift tax? Estate tax? Let's be a bit more specific. Perhaps someone who knows more about the Act can get to this before I can. Yours, Famspear 14:24, 27 April 2006 (UTC)[reply]

I'm also confused by the sentence "claiming that they need only report the "face value" of the coin and not that actual fair market value". This seems to imply that the "face value" of the coin is not the "fair market value" of the coin. Value in what currency? If by this they mean its market value in gold eagle coins, then the face value IS the market value. However, I suspect they mean its market value in Federal Reserve Notes, with the implication being that gold eagle coins are NOT proper currency, that Federal Reserve Notes ARE proper currency, and that the only determinate of value is in relation to FRNs. Anyway, that seriously needs to be clarified. Are these coins currency, and a measure of value or aren't they? Bozimmerman 23:16, 8 November 2007 (UTC)[reply]

Dear editors: I have re-organized and re-written the tax-related parts of the article. Also, there was some confusion about the Kahre case that I have (hopefully) clarified).

Regarding editor Bozimmerman's questions: Are the gold coins "currency," and are they a "measure of value"? I'm not sure what you mean. I'll try to answer this way.

Essentially, you are correct in your understanding that the fair market value of the gold coins is greater than the face value of the coins. That means that paying someone with a "one dollar" gold coin will get you more than one dollar value of goods and services.

Turned around the other way, assume that you are a plumber by trade, and that someone calls you and asks you to provide, say, $100 worth of plumbing work. That means that if you did the work, you would agree to take exactly 100 "one dollar" Federal Reserve notes as fair payment.

Now, suppose your customer is a collector who holds a lot of gold coins (and knows a lot about what the coins are worth). Suppose you and he agree that you will be paid in gold coins, not Federal Reserve notes. Because of the market for gold coins or whatever, that person will insist that you agree that he is going to pay you less than one hundred "one dollar" gold coins for your "one hundred dollars worth of plumbing work." Certain gold or silver coins are simply worth more to most people than their face amount.

To put it another way, the one dollar gold coin is simply worth more in the market place than the one dollar Federal Reserve note -- even if both are legal tender for antecedent debts. The whole "legal tender" versus "not legal tender" issues and "circulating" versus "not circulating" issues are pretty much immaterial in this sense. For example, it's not a question of whether Federal Reserve notes are "currency" or not (although they are currency, of course). It wouldn't matter whether the "other side of the transaction" is Federal Reserve notes, or bags of ice, or Lexus automobiles. The key is that the one dollar gold coin is simply worth more to most people than a one dollar Federal Reserve note.

On the tax side of it: Essentially, under U.S. Federal income tax law, if you receive gold or silver coins (say, as payment for work you perform) you are taxed at the higher fair market value of the coins -- regardless of whether the coins are legal tender or not, and regardless of whether the coins are actually "circulating" or not.

I hope that clarifies a little. Yours, Famspear 21:00, 10 November 2007 (UTC)[reply]

Well if the gold coins have a higher fair market value do the frns have a lower market value? sounds like two competeing currencys. one has a higher market value than its face value and one has a lower market value than its face value. how can the rules apply to one and not the other? or the rules of the IRS interpreted only in their favor ? because the Market value of the frns goes down everyday. does the IRS let me use the fair market value of the frns? How about if I got paid in cow manure? —Preceding unsigned comment added by 67.187.33.121 (talk • contribs)

If perchance the government were to coin money out of cowchips, and you were paid in cowchips, then you would be taxed at the face value of the currency even if the market value of cowchips by weight was less than the weight of your pay. The reason is that if it is valid currency, the minimum value is the face the face value. If the government were to make a $10 coin out of a cowchip, every bank in America would have to redeem that coin for a $10 bill if you asked, even if the material of which it was made was worth 10 cents if you were just selling it as a cowchip instead of a coin. Consider the dollar bill. It's just a piece of paper, with an actual worth of less than a penny - that is, if you had a hundred unprinted pieces of the paper on which currency was printed, you probably couldn't get more than a dollar for the lot (except from a hopeful counterfeiter). With gold and silver, the value of the raw material may be more than the face value of the coin. Even though a bank would only be legally required to redeem a $10 gold coin for a $10 bill, you could very easily find another person who would pay you the going rate for the gold by weight, so that is really the "income" you have realized when someone pays you in gold. bd2412 T 03:32, 16 August 2008 (UTC) The problem with your argument is that you are saying that the currency is not competing but is the same currency. if you go to the bank with 10 Jamaican dollars do you get 10 dollars worth of FRNs no! when you go to the bank and buy a 1 dollar 1 silver liberty dollar do you pay 1 FRN for it NO! is the US mint selling 50 dollar gold coins for 50$FRNs NO! Just like when you convert Yens to FRN dollars there is a conversion rate OUR two legal currency's that are competing have a conversion rate. Elementary.[reply]