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Old 05-13-2012, 09:09 AM   #1
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28% Capital Gains Tax on PM & The Black Market

Assuming the end of the dollar doesn't turn into a scorched earth, scene from Independence Day, hellhole, there are people that believe the precious metals will be subject to the 28% capital gains tax. (aka the fed government will still be around)

Quote :
In the interest of full disclosure, I do not recommend precious metals including “junk silver.” I just use it here to illustrate the principle of liquid hard assets. One reason I oppose precious metals at present is the tax law. If you bought a 1964 dime for $1.30, then used it to buy a $90,000 cheeseburger, the McDonald’s is required to submit a Form 1099B (for barter or bullion—in this case, the dime would be both) with the IRS. That would reveal you had a capital gain of $117,000 - $1.30 = $116,998.70. Capital gains are usually taxed at 15%, but not precious metals, art, or collectibles. Those are taxed at 28%. So you would owe $116,998.70 x 28% = $32,759.64 in taxes. Don’t feel too bad though. The minimum wage at that point would probably be $7.25 x 300 x 300 = $652,500 an hour.

One suspects that the tax law would be changed during hyperinflation, but as it currently stands, capital gains are not indexed.
- http://www.johntreed.com/liquidhardassets.html

That author makes no mention of silver/gold fundamentals and uses only historical data and thus thinks gold/silver are 'overvalued' even though he predicts a hyperinflation/depression. But it's a scary example of how the government will try and tax away our livelihood.

So my question is:
If this does happen, how can we buy real estate without the government stealing our wealth? Example: If I want to buy an apartment complex with silver, is there any way to do it without Uncle sam raping me? I understand that there is a black market for almost all other things, but real estate seems tricky.

Also, there are those that predict a 90% tax on precious metals and I read that thread, but it didn't seem to address buying real estate on the Down Low. Any ideas are appreciated.
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Old 05-13-2012, 11:39 AM   #2
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His calculation of a capital gain assumes you acquired the dime for $1.30 and McDonald's accepted it in payment for a $90K cheeseburger? I don't understand that at all. If we get the point where a McDonald's cheeseburger is $90K, I don't think McDonald's is still going to be in business and I doubt many people are going to be complying with reporting of barter transactions.

You might find this interesting: http://www.pmbug.com/forum/f4/book-e...dy-weimar-479/
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Old 05-13-2012, 04:15 PM   #3
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If anyone thinks McDees will report a transaction like that if that scenario happens, he is sadly mistaken. That would be the same as McDees reporting EVERY sale today - The paperwork would consume more time and money than it takes to make the burger. If they even tried, they would be bankrupt within a month.
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SILVER is the money of GENTLEMEN.
BARTER is the money of PEASANTS.
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Old 05-13-2012, 05:56 PM   #4
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Originally Posted by PMBug View Post:
His calculation of a capital gain assumes you acquired the dime for $1.30 and McDonald's accepted it in payment for a $90K cheeseburger? I don't understand that at all.
The MCD example is a poor one, but basically he's saying If I bought the dime before hyperinflation (~$2 today) then paid for a burger in hyperinflation-adjusted silver then I would be taxed on my gains. The $90k is irrelevant to the seller because he will be after real assets only. Of course they wouldn't fill out a form for everyone. But my question isn't about the local fast food place, but rather banks/businesses that will be selling real estate.

Also thanks for that link, hopefully it will describe how businesses operated through the hyperinflation vis-a-vis taxation.
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Old 05-14-2012, 11:47 AM   #5
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...and how anyone could proof, when did you bought that silver dime, i.e. you can always say that you've bough it 10 min.s ago from the guy on the corner, for $90k. Problem solved.

...small transactions like that are not a problem. But big ones (re: buying real estate, for example), would be - without attracting all kinds of wrong govt attention.

My take (and probably, my way forward, if I can pull this all out) - I will be buying some land, sooner rather than later, and getting some half of it's value mortgaged - and using non-floating interest rate mortgage (they are more expensive, but I will not be getting too much of it, and will use rather short payback time). The other half of the value, I plan to have it tucked in my mattress (in the form of Au/Ag, 50/50). So in case of hyperinflation, possibly, my other half of land will pay back on itself - will be paid with worthless money, pre-hyperinflation figures. Something along the lines had actually happened to many people having their non-adjustable interest rate mortgages in Poland, in early '90ties - we've had a period of a hyperinflatin back then, when exiting centrally-planned economy, and entering the market economy. Some people's monthly payments went down to a less than a bottle of a beer, post-inflation

Even if things get really sticky, I shall be able to gradually unload my PMs, and pay any due fees with them - staying below the radar.

That is the plan, at least Still not sure if I want to do this here in Ireland, or try my luck in New Zealand instead.

Yet another thing is, that continuosly more US states are either legislating, or at least conducting studies, on re-instantiating Au/Ag as a legal tender. I don't remember the specifics, but I believe that one had already passed appropriate laws (Louisiana???), and few are considering/studying it. (If it is not bullish, I don't know what is ). So the trends at least at state level, seems to be rather the opposite way - getting rid of xcess taxation of PMs, rather that punitive taxing them

Last edited by bushi; 05-14-2012 at 11:57 AM.
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Old 05-14-2012, 12:03 PM   #6
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Originally Posted by bushi View Post:
...
Yet another thing is, that continuosly more US states are either legislating, or at least conducting studies, on re-instantiating Au/Ag as a legal tender. I don't remember the specifics, but I believe that one had already passed appropriate laws (Louisiana???), and few are considering/studying it. (If it is not bullish, I don't know what is ). ...
Utah passed a measure. Several more states (Washington State, South Carolina, etc.) have bills pending.
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Old 05-14-2012, 01:26 PM   #7
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The few times I have flipped in and out of a portion of my stack, I never paid capital gains on the profit. While it was only a total of around twelve grand, I filled out no forms and never even got a receipt. All the transactions were in cash. find yourself a LCS who deals with cash and sell them that way if you are selling. Like I said, I do arbitrage plays from time to time, but I always buy back in. In fact, this is looking like a pretty good buy in point for further stacking.
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Old 05-14-2012, 01:54 PM   #8
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Originally Posted by bushi View Post:
My take (and probably, my way forward, if I can pull this all out) - I will be buying some land, sooner rather than later, and getting some half of it's value mortgaged - and using non-floating interest rate mortgage (they are more expensive, but I will not be getting too much of it, and will use rather short payback time). The other half of the value, I plan to have it tucked in my mattress (in the form of Au/Ag, 50/50). So in case of hyperinflation, possibly, my other half of land will pay back on itself...
A-freaking-MEN!

This is _exactly_ what I'm doing/have done.

Bought land...paid half with fiat and then a 5% interest rate on the nominal remaining 50%.

With the remaining 50% of fiat I purchased AG.

Hard assets trump fiat any day of the week right now.
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Old 05-15-2012, 09:53 PM   #9
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Ah yes the legal tender law bills are very promising indeed. I hope they get around to passing one in my state.

Thanks for the ideas guys.
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