Precious Metals Purchasing Question

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Jager06's picture
Jager06
Status: Gold Member (Offline)
Joined: Dec 2 2009
Posts: 395
Precious Metals Purchasing Question

Ok, I have a question that has been bugging me for a while and my CPA is not giving me what I think is the complete answer.

One of my many endeavors is current presidency of a small retail shipping corporation, like I'm the onlly executive small. Less than $700k a year small.

We do have a small profit this year, and I want the company to buy Gold and Silver in face value coins ($20/ $35 Dollar US Pieces and $1 silver rounds) to protect against the price inflation of some of our products and energy consumption costs. I also want to maintain some semblance of physical possesion and control of these assets, as they will double as the escape option for getting my family and employees out of the country should it come to that, and should they want to depart with us. Think U.S. Special Forces Krugerrand issue as a means of paying for for safe harbor through enemy territory.

I am also aware that a man in Nevada was paying his employees in "face value" gold and silver coins and only taxing them in FRNs based on the face value of the coins. This landed him in court with the IRS and he won handily, but it did drag for 5 months.

So my question for the Investment Guru, CPA and IRS types hanging around here is this; What are the advantages and disadvantages to buying and holding PMs via a corporate account? What about transferring between the PMs and FRN for operational purchasing power protection?

Would it better to hang a sign out front announcing that we accept face value US silver $1 oz rounds and $20 / $35 gold pieces and absorb the PMs as people spent them, only claiming face value for the income and saving on taxes?

CALIFORNIA DISCLAIMER:

Any responses or advice given are just that and have no bearing on my final decision. No representation of professionalism is expected and no liability is incurred to anyone commenting here for any reason. No lawsuit can originate from this poster for advice or tutorials given in response.

See your participating federal prosecutor for details, offer expires with the Mayan Calendar, no proof of purchase required, participation is mandatory.

When you are done laughing, I would like to hear some thoughts....

 

 

james_knight_chaucer's picture
james_knight_chaucer
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Posts: 160
Re: Precious Metals Purchasing Question

Karl Denninger pointed out that the problem with PMs is how to exchange it without being robbed. If you exchange it legally, the government will want capital gains tax. If you exchange it illegally you run the risk of having it all stolen.

Here in the UK, there is one exception to the Capital gains tax, and that is for sovereigns, because they are classed as British currency. Correct me if I'm wrong, but I don't think you even have that exemption in America for currency. I imagine you would still have to pay capital gains tax on any (theoretical)  profit you made on such coins even if they were held by a company.

Jager06's picture
Jager06
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Posts: 395
Re: Precious Metals Purchasing Question

That seemed to be the crux of the issue that went to federal court in Nevada. The company was able to write off the cost of the value of the metals, while only "paying" it's employees the face value of the coins. So the company spent $1200 on an ounce of gold, and the employee was paid in United States mint coin, face value of $20, which was that same $1200 metal value coin.

I suspect you are right about the capital gains taxes. I am thinking more of taking the risk, and having enough metals to cover the debts of the business, at a projected future value, worst case fiat scenario. So $500 oz silver? I am going to need input on what that might mean to the economy of main street....$500 an ounce silver.

Can we expect a loaf of bread to then be $50?

ao's picture
ao
Status: Diamond Member (Offline)
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Posts: 2220
Re: Precious Metals Purchasing Question

Jager06,

There's a discussion about this back in the archives.  My personal feeling is that it draws a big red bullseye on your back for the IRS and even if you beat them in court, you lose in terms of stress, worry, harassment, time lost from more productive endeavors, legal fees, etc.  I'd take a pass.

Ken C's picture
Ken C
Status: Platinum Member (Offline)
Joined: Feb 13 2009
Posts: 753
Re: Precious Metals Purchasing Question
Jager06 wrote:

 

I am also aware that a man in Nevada was paying his employees in "face value" gold and silver coins and only taxing them in FRNs based on the face value of the coins. This landed him in court with the IRS and he won handily, but it did drag for 5 months.

 

Jager,

I think you may have been misinformed about the outcome of the Nevada trial. Here is a link to a GATA article  on that subject.

http://gata.org/node/7696

A federal jury Friday found Las Vegas businessman Robert Kahre guilty of all 57 felony counts of evading taxes, failing to withhold taxes from workers' wages, and engaging in fraud during real estate transactions.

Three other defendants were found guilty of most but not all of their related charges.

Kahre had claimed he tried to legally avoid taxes by creating a cash payroll system that disbursed gold and silver coins, on the theory that recipients could go by the coins' face value for tax purposes.

Though the trial lasted almost three months, the jury took only a day and a half to deliberate.

 

I think the jurors could have made a profound impact on our financial system had they voted the other way. It still seems to me that Kahre had a legitimate defense but I was  not on the jury.

 

Ken

 

 

Jager06's picture
Jager06
Status: Gold Member (Offline)
Joined: Dec 2 2009
Posts: 395
Re: Precious Metals Purchasing Question

Yikes....I need a lawyer that knows what they are talking about too. I was told that Kahre had succeeded.

Hmmm.

Definately a game changer, thanks for all of your responses.

Dogs_In_A_Pile's picture
Dogs_In_A_Pile
Status: Martenson Brigade Member (Offline)
Joined: Jan 4 2009
Posts: 2606
Re: Precious Metals Purchasing Question
Ken C wrote:
Jager06 wrote:

I am also aware that a man in Nevada was paying his employees in "face value" gold and silver coins and only taxing them in FRNs based on the face value of the coins. This landed him in court with the IRS and he won handily, but it did drag for 5 months.

Jager,

I think you may have been misinformed about the outcome of the Nevada trial. Here is a link to a GATA article  on that subject.

http://gata.org/node/7696

A federal jury Friday found Las Vegas businessman Robert Kahre guilty of all 57 felony counts of evading taxes, failing to withhold taxes from workers' wages, and engaging in fraud during real estate transactions.

Three other defendants were found guilty of most but not all of their related charges.

Kahre had claimed he tried to legally avoid taxes by creating a cash payroll system that disbursed gold and silver coins, on the theory that recipients could go by the coins' face value for tax purposes.

Though the trial lasted almost three months, the jury took only a day and a half to deliberate.

I think the jurors could have made a profound impact on our financial system had they voted the other way. It still seems to me that Kahre had a legitimate defense but I was  not on the jury.

Ken

Ken -

As I recall the discussion in the earlier thread was pretty spirited.  It seems to me that the jury came to the correct verdict on this one.

From your link (and others I read) here's the distilled version:

Kahre paid his employees what they earned.  He paid them in coin based on what the market value of the PM content was, immediately bought them back using FRN paper, but claimed the face value of the original coin for tax purposes?

So for example, let's say a guy works for Kahre and makes $100. 

Kahre gives the guy 9 Ben Franklin half dollars - using the Silver Melt Value calculator (http://www.coinflation.com/coins/silver_coin_calculator.html) the 9 half dollars comes out to a value of $99.61.  (Also assumes no numismatic premium)

Kahre then turns around and gives the guy $99.61 (close enough to $100), claims the face value of the 9 Franklin halves ($4.50) for tax purposes and now has the balls to wonder why he went to court for tax evasion???

What am I missing here?

I'm not saying the tax code isn't jacked up and needs to be tossed out the window, but c'mon.  If I was on that jury it would have taken me a minute and a half to deliberate and come up with a guilty verdict.

Ken C's picture
Ken C
Status: Platinum Member (Offline)
Joined: Feb 13 2009
Posts: 753
Re: Precious Metals Purchasing Question
Dogs_In_A_Pile wrote:

 

I'm not saying the tax code isn't jacked up and needs to be tossed out the window, but c'mon.  If I was on that jury it would have taken me a minute and a half to deliberate and come up with a guilty verdict.

Dogs,

The tax code certainly is jacked up and every time congress tries to FIX it it gets more jacked up and more complicated.

I have no hope that congress can overhaul the current financial and tax system so that it becomes fair and equitable for the average American.

In my opinion the only way to fix it is for juries to start returning not quilty verdicts whenever the gov. brings a case such as this. When the gov. can longer get a conviction then maybe something will be done to completely re-vamp the system. Throw this one out and start over again.

Indeed there will be scam artists that will try to take advantage but in my view the gov. is the biggest scam artist of them all.

 

Ken

 

Dogs_In_A_Pile's picture
Dogs_In_A_Pile
Status: Martenson Brigade Member (Offline)
Joined: Jan 4 2009
Posts: 2606
Re: Precious Metals Purchasing Question
Ken C wrote:

In my opinion the only way to fix it is for juries to start returning not quilty verdicts whenever the gov. brings a case such as this. When the gov. can longer get a conviction then maybe something will be done to completely re-vamp the system. Throw this one out and start over again.

I'd agree with you if we were talking about a Mom and Pop corner store that was paying the neighborhood kid on the side every now and then. 

From your linked article "According to prosecutors, during the span of the payroll conspiracy, Kahre paid at least $25 million in untaxed wages to his workers and about $95 million to people who worked for client companies."

That is a load of BS - regardless of how screwed up the system and the politics are.  That is tax evasion on a scale that illustrates he was in it for his own greed.  He deserves to have the boom lowered on him.

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