That Legal Tender Gold Eagle

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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.

December
16, 2011

Kevin
Brekke is contributing editor for BIG
GOLD in Casey’s Daily Dispatch and writes for International
Man.

Copyright
Â© 2011 International
Man