Face Value of Bullion Coins

[nickndfl]

Q: Did anybody ever think about WHY sovereign mints place such a low face value on their bullion products?

A: These low face values help ensure non-circulating bullion is used for its intended purpose as an investment or a collectible and never treated like an ordinary coin used to buy goods and services.

 

[pmbug]

Yep. They got "90% silver" status from the get go.

Gold Bullion Coin Act of 1985 - Wikipedia

en.wikipedia.org

 

[Cigarlover]

Q: Did anybody ever think about WHY sovereign mints place such a low face value on their bullion products?

A: These low face values help ensure non-circulating bullion is used for its intended purpose as an investment or a collectible and never treated like an ordinary coin used to buy goods and services.

I don't think the mints set the value. Congress does with their delegated authority to do so.

The bigger question in my mind is why don't more people use these as a medium of exchange or even demand their employers pay them in real money.

The case of Thompson v. Butler, 95 U.S. 694 (1877), establishes that the law makes no legal distinction between the values of coin and paper money used as legal tender:

A coin dollar is worth no more for the purposes of tender in payment of an ordinary debt than a note dollar. The law has not made the note a standard of value any more than coin. It is true that in the market, as an article of merchandise, one is of greater value than the other; but as money, that is to say, as a medium of exchange, the law knows no difference between them.

So essentially Nick hires me to build him a deck. I contract with him to build that deck for 200 silver dollars. My gross income on that project is 200 dollars.
Let's say I do this lots of time throughout the year. At the end of the year my income after expenses is 9000 dollars. Since there is no requirement to file an income tax if your income is less than 14,000 dollars, you have earned 9000 silver dollars tax free. If silver is wroth 25 dollars an oz, that's 225,000 in federal reserve notes if converted.

Keep in mind the conversion to federal reserve notes is a taxable event. your cost basis would be 1 dollar and the sale price 25 so you have a capital gain of 24 dollars an oz for every oz you convert.

Another example would be that you are able to gift 14,000 a year (Maybe more now) tax free. Why not gift silver dollars.?

 

[Viking]

I don't think the mints set the value. Congress does with their delegated authority to do so.

The bigger question in my mind is why don't more people use these as a medium of exchange or even demand their employers pay them in real money.

So essentially Nick hires me to build him a deck. I contract with him to build that deck for 200 silver dollars. My gross income on that project is 200 dollars.
Let's say I do this lots of time throughout the year. At the end of the year my income after expenses is 9000 dollars. Since there is no requirement to file an income tax if your income is less than 14,000 dollars, you have earned 9000 silver dollars tax free. If silver is wroth 25 dollars an oz, that's 225,000 in federal reserve notes if converted.

Keep in mind the conversion to federal reserve notes is a taxable event. your cost basis would be 1 dollar and the sale price 25 so you have a capital gain of 24 dollars an oz for every oz you convert.

Another example would be that you are able to gift 14,000 a year (Maybe more now) tax free. Why not gift silver dollars.?

Some guy tried that a while back for his employees, and the IRS went after him, and he lost.

 

[Cigarlover]

Some guy tried that a while back for his employees, and the IRS went after him, and he lost.

Yes I think his name was Kerry out in Nevada. What he did was illegal and he was rightly prosecuted for it.
He basically paid his employees with gold and silver in one window and bought it back right next door in another window. He was defrauding the IRS. It would have been fine for him to just pay them all in real money. It would have then been on the employees to report any capital gains if they decided to cash any of it in.

I thought his name was Kerry but I cant find it now. I spoke with his brother at the time to get the real story and not just the IRS narrative. I never downloaded and read the transcripts from the case but he said either an accountant or an accountant from the IRS (Maybe he was a witness for the IRS) said on the stand that face value is what would have to be declared when making an exchange with real money.
So basically the contracts specified payment was to be made in gold or silver. The cost of procuring that gold and silver was a write off for the company as they were under contract to do so. Any reporting of the employees wages would have been done at face value. And legally so.