zev_steinhardt’sthread got me thinking about a few things about trading with gold. Live, honest to goodness, pure gold.
I had been under the impression that owning bullion or gold coins was illegal in the U.S. (and I differentiate between “bullion” as being smelted bars of gold, versus what I’ll call “wild gold” in what you either pan for or dig out of a vein), but apparently has been nullified in 1975 by a different law. Does this mean that people can freely trade gold set by current market prices (as in the Wall Street Journal), and that’d be legally binding in the eyes of the Feds, “barter rules”* notwithstanding?
I’ve gone panning as a college student in Arizona before. Never found much beyond a few flakes which I kept (and lost over time) as a keepsake. Now, say that whopper of a vein comes in, and I find 15 lbs. of the stuff. Obviously, I’d stake a claim by Arizona laws and wear a wheel gun, but can I walk into any bank, plunk it on the counter and exchange it for hard cash? Who do I sell my “wild gold” to, and does Uncle $am tax that as income?
Beyond panning, I’ve been to Kuwait. I will honestly say that there was an entire mall that had nothing but gold dealers. You could walk in and buy fine jewlery. You could also walk in and buy bullion by the ounce/kilogram. It was weird, but cool. Assuming I kept it below the $10,000 mark of currency or cash, would Uncle $am look at me crosseyed for essentially importing gold for my own purposes? It’s not like I’m importing so much that I’m going to deflate the value that’s stored in Fort Knox. . .
“Barter Rules”: We’ve all done this before. You paint my house, and I’ll cook dinner for you for a week. No cash, it ain’t reported as income, it’s just flat out barter.
Tripler
Re. #2: I fully realize it’s a bad idea to wear a revolver in a bank.
No, you can’t walk into a bank and expect them to buy gold from you. They don’t accept payment in goats or bushels of wheat either. You are perfectly free to only use gold in your financial transactions, the problem is getting other people to accept gold from you or pay you in gold. Almost everyone you meet is going to prefer to accept US currency instead of gold, and almost everyone you meet would prefer to pay you in US currency instead of gold.
Yes, if you’re a gold miner you still have to pay taxes. If you’re keeping gold nuggets under your bed Uncle Sam is going to have a hard time proving it but when you sell your gold nuggets it becomes much easier. Of course there are all sorts of businesses that lend themselves to cash and barter and are therefore much harder for the IRS to keep track of. You are still legally required to pay taxes, just because the IRS will likely never find out you’ve been mowing lawns for cash it doesn’t mean you don’t owe taxes, only that you’ve gotten away with breaking the law.
Gold is just a commodity. Gold itself isn’t money although it can be used for money. Cacao beans aren’t money either, although they used to be used for money also.
“Barter Rules”: We’ve all done this before. You paint my house, and I’ll cook dinner for you for a week. No cash, it ain’t reported as income, it’s just flat out barter.
[QUOTE]
To hijack, while we all may have done this, the law in the U.S. states that you report the value of the barter as income and pay taxes on it at your standard rate, just like any other income.
Not reporting it is income tax evasion, just as not reporting any cash coming in is.
You sell it to me, a coin dealer. You’d need a guy who could write you a good check. 15 pounds would be an amount that you would actually send to a refinery yourself and they would smelt it and give you the money less a fee. But you’d get about 95+% of the amount that it melted for. The reason you’d sell it to me, the coin dealer, is that I might only give you 92%, but I’d write you a good check on the spot which you could cash. If you send to the refinery, you might get paid in a few weeks or so.
But note that attractive native gold nuggets can be worth a bit more than the commodity price for gold…not much more, but you might not want to melt native nuggets down right away.
Is that true? Suppose I find a fifteen pound gold nugget in the ground like Tripler described. Its market value would be about $100,000 if I sold it but I decide to keep it as a good luck charm. Being as it never generated any income for me would it be a taxable asset? Or is it just another rock until I decide to sell it for cash?