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Old 09-10-2014, 08:51 AM   #1
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Lightbulb Legal tender gold and the face value vs. bullion value tax issue

I thought we had a thread in here where we discussed this topic previously, but I can't seem to find it right now.

You might be familiar with the story of Robert Kahre:
Quote :
... He had upset the Internal Revenue Service by paying his workers based on the face value of gold and silver coins, versus the market value in the Federal Reserve system (the value of the coins in U.S. paper dollars). ...

Kahre is now serving 15 years in a Federal Penitentiary after the 9th Circuit of Appeals ruled against him:
Quote :
Suppose an employer and an employee enter into an employment contract in which the employee agrees to work at a monthly salary of $100. At the end of the month, the employer pays the employee two gold coins, each with a face value of $50. His income is $100 a month.

In essence, that’s what Kahre did. Since $100 isn’t enough to trigger IRS withholding requirements, Kahre didn’t withhold income taxes from his employees.

The IRS and the Ninth Circuit say: Oh no, you don’t. Even though those gold coins are legal tender under the law, you have to use their “fair market value” in terms of paper money in determining the employee’s actual compensation.

How does the federal judiciary justify this, given that the gold coins are legal tender at their face value? The Ninth Circuit says that IRS regulations require compensation paid in property rather than cash be valued at “fair market value” in terms of paper money. Since gold coins are property, the Court says, they must be valued at their “fair market value” in terms of paper money.

But wait a minute. Gold coins are cash. They’re just as much cash as the government’s paper money (which, like gold coins, is also property). If Congress doesn’t want U.S. gold coins to serve as money, then why does it just make one-ounce coins without a monetary denomination stamped on them? Why does it make the gold coins legal tender?

And pray tell: Since when does an IRS regulation overrule a law enacted by Congress?

I was surprised to see an op-ed piece in Forbes essentially advocating for people to follow Kahre's footsteps:
Quote :
The IRS says this sort of thing is “frivolous.” But that’s administrative law again, as in Philip Hamburger’s wonderful new book, Is Administrative Law Unlawful, which of course it is. Freedom of Information Act requests inquiring of the paper-trail within the IRS about how this “frivolous” finding was made have yielded 8,000 pages of internal emails conceding there is no grounds, but let’s do it anyway. A writ of certiorari calling on the Supreme Court to stop this nonsense is in the inbox of the august body.

I wish the author had provided more detail on the writ before the SCOTUS.
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