A recent interesting criminal tax law case dealing with gold coins
Longacre
Posts: 16,717 ✭✭✭
I assume that no one saw the report of this motion in limine that deals with both the tax law and the use of gold coins by the defendants to avoid income taxes. It looks like the defendants paid and received wages in gold and silver coins in exchange for good and services. They then claimed the face values of the coins for tax reporting purposes (for example, for gold coins received as wages, they included the face value as income for tax purposes; for gold coins paid as wages, they claimed the face value in order to calculate withholding taxes, etc., rather than using the FMV of the coins).
I particularly like this quote by the court, based on the Cheek case, which people rely on to avoid the willful evasion criteria: “The Supreme Court further reasoned that ignorance to the law could be a defense in the criminal tax context "largely due to the complexity of the tax laws" where "[t]he proliferation of statutes and regulations has sometimes made it difficult for the average citizen to know and comprehend the extent of the duties and obligations imposed by the tax laws."
I guess that is why those filthy, stinkin’ tax lawyers charge so much dang money.
What do you think of the case? Hopefully someone else finds it interesting.
****************************
Alleged Tax Evaders Allowed to Present Evidence on Gold Coin Usage
A U.S. district court has allowed two individuals charged with tax evasion to present evidence that they used gold coins at their face value to reduce taxes believing they were not violating the law, but won't allow them to argue that their belief was correct or that they had a right to exclude the coins' fair market value from income.
Citations: United States v. Alexander Loglia et al.; No. 2:05-cr-00121
Date: Jan. 5, 2007
UNITED STATES OF AMERICA
Plaintiff,
v.
ALEXANDER LOGLIA, ET AL.;
Defendants.
UNITED STATES DISTRICT COURT
DISTRICT OF NEVADA
ORDER
This matter comes before the Court on the Government's Motion in Limine to Preclude Defense Based Upon Payment in Gold & Silver. (#488.) The Court has considered the Motion, the pleadings on file, and oral arguments on behalf of the parties. IT IS HEREBY ORDERED that the Government's Motion is granted in part and denied in part.
BACKGROUND
On May 29, 2003, Internal Revenue Service ("IRS") agents executed search warrants at various business locations used by Defendant David Kahre ("Kahre"). As a result of that search, a federal grand jury returned an indictment against multiple individuals, including Kahre. The Government charged Kahre with two counts of attempting to Evade or Defeat Tax in violation of 26 U.S.C. § 7201, and one count of Conspiracy to Attempt to Evade or Defeat Tax. On April 4, 2006, the United States issued a superseding indictment charging Kahre with additional counts and crimes. Defendant Alexander Loglia ("Loglia") has also been charged in this case. Although Loglia's and Kahre's cases are on separate dockets (05-cr-00121 and 05-cr-00120), Loglia has filed a Notice of Joinder in Kahre's opposition to the Government's currently pending motion in limine. The following chart summarizes the counts against Loglia and Kahre (collectively "Defendants"):
_____________________________________________________________________
Defendant Counts Charge
_____________________________________________________________________
Kahre 1-2, 10-13 26 USC § 7201 -- Attempt to
Evade or Defeat Tax
3 18 USC § 371 -- Conspiracy to
Attempt to Evade or Defeat Tax
7 18 USC § 1343 -- Wire Fraud
_____________________________________________________________________
Loglia 147-150, 152-156 26 USC § 7201 -- Attempt to
Evade or Defeat Tax
151 26 USC § 7206(1) -- Filing a
False Tax Return
187 18 USC § 371 -- Conspiracy to
Attempt to Evade or Defeat Tax
_____________________________________________________________________
The Government alleges that Kahre wilfully attempted to evade paying $524,374 in taxes by concealing and attempting to conceal assets from the IRS, and that Laglia wilfully attempted to evade paying over $100,000 in taxes. The Government also claims that Defendants failed to file tax returns for several years. Specifically, the Government argues that Defendants used gold and silver coins to evade paying taxes. According to Defendants, they used the coins to conduct business in conjunction with their "boycott of the Federal Reserve System." (#83, 2.) Defendants used these coins to transact all business. The coins' fair market value exceeds their face value. Defendants paid and received wages in gold and silver in exchange for goods and services. Based on the coins' face value, the compensation received is below the dollar threshold requirement to withhold and/or pay income taxes. Defendants reported all income and transactions at the face value amount, failing to report the difference as income, which reduced their respective tax liabilities. Ninth Circuit precedent clearly requires a taxpayer to report the coins' face value as income. Although Defendants admit they used gold and silver coins to lower or reduce their tax liability, they argue that "using and contracting to use gold and silver coins at face value as a medium of exchange is a lawful exercise of a statutory right." Id. Defendants plan to argue at trial that they were not guilty because they honestly thought they were entitled to report income at the coins' lower face value, and that the law supports such a belief.
DISCUSSION
The Government has filed a motion in limine asking the Court to preclude Defendants from using any defense or evidence based upon a theory that using gold and silver coins allows Defendants to report only the coins' face value as income. For the reasons discussed below, the Court grants in part and denies in part the Government's motion.
I. Defendants' "Good Faith Belief"
The Government asks the Court to exclude any "defense based upon payment in gold and silver" because the Ninth Circuit has repeatedly held that the amount realized in a transaction using gold and silver coins is the fair market value, and not the coins' face value. See, e.g., Cordner v. United States, 671 F.2d 367, 368- 69 (9th Cir. 1982) (holding that when gold coins have a fair market value in excess of face value, taxpayers must report income at the fair market value); see also Cal. Federal Life Ins. Co. v. Comm'r, 680 F.2d 85, 86-87 (9th Cir. 1982) (same). Although the Government correctly argues that such income is taxable, to convict Defendants for the crimes alleged, the Government must establish that Defendants "willfully" failed to pay the required taxes. As discussed below, the Court will not allow Defendants to present any arguments that the law allows them to exclude from income the coins' fair market values or to otherwise argue what the relevant tax law holds. Defendants may only present a good faith defense that they believed they could report the income as they did for the limited purpose of negating the relevant mens rea requirement, but Defendants cannot argue that their belief was actually correct.
A. Willfulness
Tax evasion and failure to file tax returns require that the offender act "willfully." I.R.C. §§ 7201-07. The Government must establish willfulness to support a conviction under 26 U.S.C. § 7201. United States v. Bishop, 291 F.3d 1100, 1106 (9th Cir. 2002) (citing United States v. Bishop, 412 U.S. 346, 361 (1973)). Willfulness is also an element of conspiracy to defraud the United States. Id. (quoting United States v. Crooks, 804 F.2d 1441, 1448 (9th Cir. 1986)).
In Cheek v. United States, which involved a prosecution under sections 7201 and 7203, the Supreme Court held that "[w]illfulness, as construed by our prior decisions in criminal tax cases, requires the Government to prove that the law imposed a duty on the defendant, that the defendant knew of this duty, and that he voluntarily and intentionally violated that duty." 498 U.S. 192, 201 (1991)). Cheek also held that a taxpayer who violates the tax law based on good faith ignorance of the law or an erroneous belief that he was not violating the tax code does not act "willfully," even if the taxpayer's belief is objectively unreasonable:
f the Government proves actual knowledge of the pertinent legal duty, the prosecution, without more, has satisfied the knowledge component of the willfulness requirement. But carrying this burden requires negating a defendant's claim of ignorance of the law or a claim that because of a misunderstanding of the law, he had a good-faith belief that he was not violating any of the provisions of the tax laws. This is so because one cannot be aware that the law imposes a duty upon him and yet be ignorant of it, misunderstand the law, or believe that the duty does not exist. In the end, the issue is whether, based on all the evidence, the Government has proved that the defendant was aware of the duty at issue, which cannot be true if the jury credits a good-faith misunderstanding and belief submission, whether or not the claimed belief or misunderstanding is objectively reasonable.
Id. at 202. Thus, after Cheek, a defendant can no longer be convicted of tax fraud if the factfinder believes the defendant's ignorance surrounding the tax law, even if the defendant's beliefs are unreasonable. The Supreme Court further reasoned that ignorance to the law could be a defense in the criminal tax context "largely due to the complexity of the tax laws" where "[t]he proliferation of statutes and regulations has sometimes made it difficult for the average citizen to know and comprehend the extent of the duties and obligations imposed by the tax laws." Id. at 199-200. However, although a defendant may raise a good faith belief or mistake defense to a jury, he may not argue that the income tax law is unconstitutional or that the tax law supports his erroneous beliefs. Id. at 206. In Cheek the Supreme Court stated: "We thus hold that in a case like this, a defendant's views about the validity of the tax statutes are irrelevant to the issue of willfulness, need not be heard by the jury, and if they are, an instruction to disregard them would be proper." Id.
In the present case, Defendants' claims may not be objectively reasonable; nonetheless, pursuant to the above analysis, Defendants may argue that they violated the tax law based on a good faith ignorance of the law or an erroneous belief that the law did not require Defendants to include as income the coins' fair market value. However, because the law clearly holds that the coins' fair market value was reportable income, they cannot argue that the law did not require them to report the difference between the coins' face and fair market values or that the tax law is somehow unconstitutional. Accordingly, the Court will not allow Defendants to present any arguments that the law allows them to exclude from income the coins' fair market values or to otherwise argue what the relevant tax law holds. Defendants may only present a good faith defense that they believed they could report the income as they did for the limited purpose of negating the relevant mens rea requirement, but Defendants cannot argue that their belief was actually correct.
CONCLUSION
The Court will allow Defendants to introduce evidence that they used gold coins to reduce taxes only to the extent such evidence relates to their good faith belief that they were not violating the law. The Court will not allow Defendants to argue or present evidence that their belief is legally correct or that Defendants had a legal right to exclude the coins' value from income. The Government will have the opportunity to present evidence that Defendants' belief was not in good faith. The Government need not adduce direct proof of willfulness -- the jury may infer intent from the defendants' acts. United States v. Spinelli, 443 F.2d 2, 2-3 (9th Cir. 1971) (citing Norwitt v. United States, 195 F.2d 127, 132-133 (9th Cir. 1952)). Therefore, IT IS HEREBY ORDERED that the Government's Motion in Limine (#488) is granted in part and denied in part.
DATED this 5th day of January, 2007.
Robert C. Jones
united States District Judge
I particularly like this quote by the court, based on the Cheek case, which people rely on to avoid the willful evasion criteria: “The Supreme Court further reasoned that ignorance to the law could be a defense in the criminal tax context "largely due to the complexity of the tax laws" where "[t]he proliferation of statutes and regulations has sometimes made it difficult for the average citizen to know and comprehend the extent of the duties and obligations imposed by the tax laws."
I guess that is why those filthy, stinkin’ tax lawyers charge so much dang money.
What do you think of the case? Hopefully someone else finds it interesting.****************************
Alleged Tax Evaders Allowed to Present Evidence on Gold Coin Usage
A U.S. district court has allowed two individuals charged with tax evasion to present evidence that they used gold coins at their face value to reduce taxes believing they were not violating the law, but won't allow them to argue that their belief was correct or that they had a right to exclude the coins' fair market value from income.
Citations: United States v. Alexander Loglia et al.; No. 2:05-cr-00121
Date: Jan. 5, 2007
UNITED STATES OF AMERICA
Plaintiff,
v.
ALEXANDER LOGLIA, ET AL.;
Defendants.
UNITED STATES DISTRICT COURT
DISTRICT OF NEVADA
ORDER
This matter comes before the Court on the Government's Motion in Limine to Preclude Defense Based Upon Payment in Gold & Silver. (#488.) The Court has considered the Motion, the pleadings on file, and oral arguments on behalf of the parties. IT IS HEREBY ORDERED that the Government's Motion is granted in part and denied in part.
BACKGROUND
On May 29, 2003, Internal Revenue Service ("IRS") agents executed search warrants at various business locations used by Defendant David Kahre ("Kahre"). As a result of that search, a federal grand jury returned an indictment against multiple individuals, including Kahre. The Government charged Kahre with two counts of attempting to Evade or Defeat Tax in violation of 26 U.S.C. § 7201, and one count of Conspiracy to Attempt to Evade or Defeat Tax. On April 4, 2006, the United States issued a superseding indictment charging Kahre with additional counts and crimes. Defendant Alexander Loglia ("Loglia") has also been charged in this case. Although Loglia's and Kahre's cases are on separate dockets (05-cr-00121 and 05-cr-00120), Loglia has filed a Notice of Joinder in Kahre's opposition to the Government's currently pending motion in limine. The following chart summarizes the counts against Loglia and Kahre (collectively "Defendants"):
_____________________________________________________________________
Defendant Counts Charge
_____________________________________________________________________
Kahre 1-2, 10-13 26 USC § 7201 -- Attempt to
Evade or Defeat Tax
3 18 USC § 371 -- Conspiracy to
Attempt to Evade or Defeat Tax
7 18 USC § 1343 -- Wire Fraud
_____________________________________________________________________
Loglia 147-150, 152-156 26 USC § 7201 -- Attempt to
Evade or Defeat Tax
151 26 USC § 7206(1) -- Filing a
False Tax Return
187 18 USC § 371 -- Conspiracy to
Attempt to Evade or Defeat Tax
_____________________________________________________________________
The Government alleges that Kahre wilfully attempted to evade paying $524,374 in taxes by concealing and attempting to conceal assets from the IRS, and that Laglia wilfully attempted to evade paying over $100,000 in taxes. The Government also claims that Defendants failed to file tax returns for several years. Specifically, the Government argues that Defendants used gold and silver coins to evade paying taxes. According to Defendants, they used the coins to conduct business in conjunction with their "boycott of the Federal Reserve System." (#83, 2.) Defendants used these coins to transact all business. The coins' fair market value exceeds their face value. Defendants paid and received wages in gold and silver in exchange for goods and services. Based on the coins' face value, the compensation received is below the dollar threshold requirement to withhold and/or pay income taxes. Defendants reported all income and transactions at the face value amount, failing to report the difference as income, which reduced their respective tax liabilities. Ninth Circuit precedent clearly requires a taxpayer to report the coins' face value as income. Although Defendants admit they used gold and silver coins to lower or reduce their tax liability, they argue that "using and contracting to use gold and silver coins at face value as a medium of exchange is a lawful exercise of a statutory right." Id. Defendants plan to argue at trial that they were not guilty because they honestly thought they were entitled to report income at the coins' lower face value, and that the law supports such a belief.
DISCUSSION
The Government has filed a motion in limine asking the Court to preclude Defendants from using any defense or evidence based upon a theory that using gold and silver coins allows Defendants to report only the coins' face value as income. For the reasons discussed below, the Court grants in part and denies in part the Government's motion.
I. Defendants' "Good Faith Belief"
The Government asks the Court to exclude any "defense based upon payment in gold and silver" because the Ninth Circuit has repeatedly held that the amount realized in a transaction using gold and silver coins is the fair market value, and not the coins' face value. See, e.g., Cordner v. United States, 671 F.2d 367, 368- 69 (9th Cir. 1982) (holding that when gold coins have a fair market value in excess of face value, taxpayers must report income at the fair market value); see also Cal. Federal Life Ins. Co. v. Comm'r, 680 F.2d 85, 86-87 (9th Cir. 1982) (same). Although the Government correctly argues that such income is taxable, to convict Defendants for the crimes alleged, the Government must establish that Defendants "willfully" failed to pay the required taxes. As discussed below, the Court will not allow Defendants to present any arguments that the law allows them to exclude from income the coins' fair market values or to otherwise argue what the relevant tax law holds. Defendants may only present a good faith defense that they believed they could report the income as they did for the limited purpose of negating the relevant mens rea requirement, but Defendants cannot argue that their belief was actually correct.
A. Willfulness
Tax evasion and failure to file tax returns require that the offender act "willfully." I.R.C. §§ 7201-07. The Government must establish willfulness to support a conviction under 26 U.S.C. § 7201. United States v. Bishop, 291 F.3d 1100, 1106 (9th Cir. 2002) (citing United States v. Bishop, 412 U.S. 346, 361 (1973)). Willfulness is also an element of conspiracy to defraud the United States. Id. (quoting United States v. Crooks, 804 F.2d 1441, 1448 (9th Cir. 1986)).
In Cheek v. United States, which involved a prosecution under sections 7201 and 7203, the Supreme Court held that "[w]illfulness, as construed by our prior decisions in criminal tax cases, requires the Government to prove that the law imposed a duty on the defendant, that the defendant knew of this duty, and that he voluntarily and intentionally violated that duty." 498 U.S. 192, 201 (1991)). Cheek also held that a taxpayer who violates the tax law based on good faith ignorance of the law or an erroneous belief that he was not violating the tax code does not act "willfully," even if the taxpayer's belief is objectively unreasonable:
f the Government proves actual knowledge of the pertinent legal duty, the prosecution, without more, has satisfied the knowledge component of the willfulness requirement. But carrying this burden requires negating a defendant's claim of ignorance of the law or a claim that because of a misunderstanding of the law, he had a good-faith belief that he was not violating any of the provisions of the tax laws. This is so because one cannot be aware that the law imposes a duty upon him and yet be ignorant of it, misunderstand the law, or believe that the duty does not exist. In the end, the issue is whether, based on all the evidence, the Government has proved that the defendant was aware of the duty at issue, which cannot be true if the jury credits a good-faith misunderstanding and belief submission, whether or not the claimed belief or misunderstanding is objectively reasonable.
Id. at 202. Thus, after Cheek, a defendant can no longer be convicted of tax fraud if the factfinder believes the defendant's ignorance surrounding the tax law, even if the defendant's beliefs are unreasonable. The Supreme Court further reasoned that ignorance to the law could be a defense in the criminal tax context "largely due to the complexity of the tax laws" where "[t]he proliferation of statutes and regulations has sometimes made it difficult for the average citizen to know and comprehend the extent of the duties and obligations imposed by the tax laws." Id. at 199-200. However, although a defendant may raise a good faith belief or mistake defense to a jury, he may not argue that the income tax law is unconstitutional or that the tax law supports his erroneous beliefs. Id. at 206. In Cheek the Supreme Court stated: "We thus hold that in a case like this, a defendant's views about the validity of the tax statutes are irrelevant to the issue of willfulness, need not be heard by the jury, and if they are, an instruction to disregard them would be proper." Id.
In the present case, Defendants' claims may not be objectively reasonable; nonetheless, pursuant to the above analysis, Defendants may argue that they violated the tax law based on a good faith ignorance of the law or an erroneous belief that the law did not require Defendants to include as income the coins' fair market value. However, because the law clearly holds that the coins' fair market value was reportable income, they cannot argue that the law did not require them to report the difference between the coins' face and fair market values or that the tax law is somehow unconstitutional. Accordingly, the Court will not allow Defendants to present any arguments that the law allows them to exclude from income the coins' fair market values or to otherwise argue what the relevant tax law holds. Defendants may only present a good faith defense that they believed they could report the income as they did for the limited purpose of negating the relevant mens rea requirement, but Defendants cannot argue that their belief was actually correct.
CONCLUSION
The Court will allow Defendants to introduce evidence that they used gold coins to reduce taxes only to the extent such evidence relates to their good faith belief that they were not violating the law. The Court will not allow Defendants to argue or present evidence that their belief is legally correct or that Defendants had a legal right to exclude the coins' value from income. The Government will have the opportunity to present evidence that Defendants' belief was not in good faith. The Government need not adduce direct proof of willfulness -- the jury may infer intent from the defendants' acts. United States v. Spinelli, 443 F.2d 2, 2-3 (9th Cir. 1971) (citing Norwitt v. United States, 195 F.2d 127, 132-133 (9th Cir. 1952)). Therefore, IT IS HEREBY ORDERED that the Government's Motion in Limine (#488) is granted in part and denied in part.
DATED this 5th day of January, 2007.
Robert C. Jones
united States District Judge
Always took candy from strangers
Didn't wanna get me no trade
Never want to be like papa
Working for the boss every night and day
--"Happy", by the Rolling Stones (1972)
Didn't wanna get me no trade
Never want to be like papa
Working for the boss every night and day
--"Happy", by the Rolling Stones (1972)
0
Comments
Actually, I guess there is a question at the end of the first two paragraphs.
Second Generation Coin, Currency and Precious Metals Dealer
Coin, Currency or Bullion Questions?
Call anytime 954-493-8811
<< <i>can you interpret it for me? I don't do well with polysyllabic words. >>
You cannot get paid by your employer with an 1861-D gold dollar and claim that you only made $1 on your tax return.
<< <i>
<< <i>can you interpret it for me? I don't do well with polysyllabic words. >>
You cannot get paid by your employer with an 1861-D gold dollar and claim that you only made $1 on your tax return. >>
thanks...that's what the judge said, right?
Now Longacre why did you post that case? Now you ruined all of our "good faith belief" defenses. I can hear the government lawyer questioning now: Are a member of the PCGS forums? You have over 40K posts on that forum do you not, averaging 19.4 posts per day? Who is Longacre? Are you familiar with his post of 1/12/2007?
Of course my answer will be: "He posts eight times simultaneously per day, do you think you could keep up with all those posts?"
Proud Participant in Operation "Stone Holey" August 7, 2008
<< <i>
<< <i>
<< <i>can you interpret it for me? I don't do well with polysyllabic words. >>
You cannot get paid by your employer with an 1861-D gold dollar and claim that you only made $1 on your tax return. >>
thanks...that's what the judge said, right? >>
The case was more about a procedural aspect. Per the opinion: "Defendants may only present a good faith defense that they believed they could report the income as they did for the limited purpose of negating the relevant mens rea requirement, but Defendants cannot argue that their belief was actually correct."
In other words, the government needs to prove willfulness (or intent (the "mens rea")) in order to prove willful tax evasion. The court will allow a defense that the defendants, in good faith, thought that they were reporting things correctly. So this may knock out the willful element of the crime. Note, however, that the court is stating that the tax law is clear that the FMV should have been used, and the "face value versus FMV" argument cannot be presented and argued. As a result, the defendants are likely to ultimately be charged with a lesser offense, and possibly only a civil tax evasion crime. However, there is no guarantee that the Government will not be able to prove its willfulness element, notwithstanding the judge's ruling.
Didn't wanna get me no trade
Never want to be like papa
Working for the boss every night and day
--"Happy", by the Rolling Stones (1972)
<< <i>
<< <i>
<< <i>
<< <i>can you interpret it for me? I don't do well with polysyllabic words. >>
You cannot get paid by your employer with an 1861-D gold dollar and claim that you only made $1 on your tax return. >>
thanks...that's what the judge said, right? >>
The case was more about a procedural aspect. Per the opinion: "Defendants may only present a good faith defense that they believed they could report the income as they did for the limited purpose of negating the relevant mens rea requirement, but Defendants cannot argue that their belief was actually correct."
In other words, the government needs to prove willfulness (or intent (the "mens rea")) in order to prove willful tax evasion. The court will allow a defense that the defendants, in good faith, thought that they were reporting things correctly. So this may knock out the willful element of the crime. Note, however, that the court is stating that the tax law is clear that the FMV should have been used, and the "face value versus FMV" argument cannot be presented and argued. As a result, the defendants are likely to ultimately be charged with a lesser offense, and possibly only a civil tax evasion crime. However, there is no guarantee that the Government will not be able to prove its willfulness element, notwithstanding the judge's ruling. >>
OK, RYK, can you help me out again?
Unlike a speeding ticket where they just have to prove that you did it, the law does not care whether you meant to speed or not.
Proud Participant in Operation "Stone Holey" August 7, 2008
<< <i>so if you are stupid, it's OK to be paid in gold coins and not pay taxes on anything more than face value? >>
What RYK said is true, too. The defendants will be charged with some crime, it just depends on which crime the government can think it can prove. It may just end up being a civil penalty rather than criminal. But I don't know all of the facts of the case to really say for sure how it will go.
Didn't wanna get me no trade
Never want to be like papa
Working for the boss every night and day
--"Happy", by the Rolling Stones (1972)
<< <i>
<< <i>
<< <i>
<< <i>
<< <i>can you interpret it for me? I don't do well with polysyllabic words. >>
You cannot get paid by your employer with an 1861-D gold dollar and claim that you only made $1 on your tax return. >>
thanks...that's what the judge said, right? >>
The case was more about a procedural aspect. Per the opinion: "Defendants may only present a good faith defense that they believed they could report the income as they did for the limited purpose of negating the relevant mens rea requirement, but Defendants cannot argue that their belief was actually correct."
In other words, the government needs to prove willfulness (or intent (the "mens rea")) in order to prove willful tax evasion. The court will allow a defense that the defendants, in good faith, thought that they were reporting things correctly. So this may knock out the willful element of the crime. Note, however, that the court is stating that the tax law is clear that the FMV should have been used, and the "face value versus FMV" argument cannot be presented and argued. As a result, the defendants are likely to ultimately be charged with a lesser offense, and possibly only a civil tax evasion crime. However, there is no guarantee that the Government will not be able to prove its willfulness element, notwithstanding the judge's ruling. >>
OK, RYK, can you help me out again? >>
Yeah, there's some legal debate on whether or not this will be considered a serious crime or a less serious one.
<< <i>
<< <i>
<< <i>
<< <i>
<< <i>
<< <i>can you interpret it for me? I don't do well with polysyllabic words. >>
You cannot get paid by your employer with an 1861-D gold dollar and claim that you only made $1 on your tax return. >>
thanks...that's what the judge said, right? >>
The case was more about a procedural aspect. Per the opinion: "Defendants may only present a good faith defense that they believed they could report the income as they did for the limited purpose of negating the relevant mens rea requirement, but Defendants cannot argue that their belief was actually correct."
In other words, the government needs to prove willfulness (or intent (the "mens rea")) in order to prove willful tax evasion. The court will allow a defense that the defendants, in good faith, thought that they were reporting things correctly. So this may knock out the willful element of the crime. Note, however, that the court is stating that the tax law is clear that the FMV should have been used, and the "face value versus FMV" argument cannot be presented and argued. As a result, the defendants are likely to ultimately be charged with a lesser offense, and possibly only a civil tax evasion crime. However, there is no guarantee that the Government will not be able to prove its willfulness element, notwithstanding the judge's ruling. >>
OK, RYK, can you help me out again? >>
Yeah, there's some legal debate on whether or not this will be considered a serious crime or a less serious one. >>
ah, more to follow. Got it. We wasted lots of electrons over this one...
Proud Participant in Operation "Stone Holey" August 7, 2008
<< <i>OK, I will keep receiving my meager paycheck in the form of American dollars for the time being. If I were paid with eggs, chickens, and goats, then I might have a chance at tax evasion? >>
Dog-- bring some of those nice half dimes and dimes to the Baltimore show in March and I will glady pay you in chickens or any farm animal of your choosing.
Didn't wanna get me no trade
Never want to be like papa
Working for the boss every night and day
--"Happy", by the Rolling Stones (1972)
While it does seem like it common sense that what they did should be illegal, I am not so sure it technically is not. (Note: This is not legal advice.) Look at the current bullion offerings by the Mint. They are monetized, which among other things, allows the gold to be sold without sales tax (in most jurisdictions). Now I am not saying that they should get away with under reporting income. Rather, if they got paid in gold and only reported face value, upon selling the coin, they would then have a taxable income of the amount they sold the coin for minus the face value, and have to pay taxes then. So rather than this being tax evasion, this would seem more like tax deferment.
Of course I could be entirely wrong...
-Fuzz
<< <i>These defendants are charged with willful tax evasion and as part of its case, the government has to show that these guys cheated on their taxes knowingly and willfully. The problem here is that it is very hard to show that they knew that they couldn't do what they did.
While it does seem like it common sense that what they did should be illegal, I am not so sure it technically is not. (Note: This is not legal advice.) Look at the current bullion offerings by the Mint. They are monetized, which among other things, allows the gold to be sold without sales tax (in most jurisdictions). Now I am not saying that they should get away with under reporting income. Rather, if they got paid in gold and only reported face value, upon selling the coin, they would then have a taxable income of the amount they sold the coin for minus the face value, and have to pay taxes then. So rather than this being tax evasion, this would seem more like tax deferment.
Of course I could be entirely wrong...
-Fuzz >>
Interesting comments. I think that it is well settled that the receipt of the gold should be reported at FMV, rather than face value. The willful intent may not be present, though, which may get them out of willfull tax evasion. I think that tax deferment is not the correct classification, though, if you were using that in the technical sense.
Didn't wanna get me no trade
Never want to be like papa
Working for the boss every night and day
--"Happy", by the Rolling Stones (1972)
Double eagle used as example only above, I have no idea what coins they actually received.
Will’sProoflikes
The Supremes say that ignorance is a valid defense!
<< <i>
<< <i>OK, I will keep receiving my meager paycheck in the form of American dollars for the time being. If I were paid with eggs, chickens, and goats, then I might have a chance at tax evasion? >>
Dog-- bring some of those nice half dimes and dimes to the Baltimore show in March and I will glady pay you in chickens or any farm animal of your choosing.
I think I will be able to make it to Baltimore in 2008. "The Man" owns me until July of this year
<< <i>Finally!
The Supremes say that ignorance is a valid defense! >>
I realize that this is a joke and it was kinda funny.
However technically, a defense means they did meet the elements of the crime and but they have either an excuse or justification as to why they should not be guilty. In this case, knowledge is an element of the crime so ignorance is not a defense, rather it negates one of the elements.
One thing which is bothering me is that had they have declared the FMV on their taxes, what FMV should they have used. For starters, is it the spot gold price on that day, is it the ebay price, or what a local dealer would give them for it? What about the date of the FMV? Would that be the day they got paid, the end of the year or some other date? If the FMV was the day they got paid and then they sold the coins later that same year for an amount below the FMV declared, can they take that at a loss?
-Fuzz
1. Who was paying them in gold?
2. If they had, in fact, taken a gold coin at face value, what would happen if they had sold it at some amount, and paid taxes on the capital gain. What would that do to their case?
https://www.pcgs.com/SetRegistry/collectors-showcase/world-coins/one-coin-per-year-1600-2017/2422
<< <i>A couple of questions.
1. Who was paying them in gold?
2. If they had, in fact, taken a gold coin at face value, what would happen if they had sold it at some amount, and paid taxes on the capital gain. What would that do to their case? >>
I don't know the facts of the case, but I assume they got paid by some of their tax protestor cohorts as wages. At that point, they should have reported the FMV as income and filed the proper returns. I am not sure whether a subsequent sale and paying capital gains would affect the case (I also think it is highly unlikely that they would sell the gold, anyway, or file a return at that point).
Didn't wanna get me no trade
Never want to be like papa
Working for the boss every night and day
--"Happy", by the Rolling Stones (1972)
I looked up the cases cited and they do hold that when paid in gold or silver coins worth more than face value, you owe income tax on the fair market value. However each case was a specific situation and those situations may not be the same as the one in the current case.
One of the cases cited involved a distribution from a corporation. It paid out dividends to the shareholder in $20 gold double eagles. In that case, there is a specific IRS law saying that dividends are taxable and the tax included fair market value.
Another case was a lawyer, apparently a tax protester, who did legal work for $1,000 but took 200 silver dollars in payment. He then paid the tax on the fair market value and then sued to get a refund. (Note: That is a good CYA method.) In that case the court ruled that since the coins were covering a debt, that the fair market value was $1,000. (At the time each silver dollar was actually worth $5 each.) I wonder if he had been paid 1000 silver dollars, what grounds they would have used to rule against him. Also, it seems like the court treated the guy pretty nice considering that he broke some court rules including filing an appellate brief over twice the limit and after he requested special permission to do so and was denied.
Now I'm left wondering a few things.
1) If the IRS claims that a gold coin is worth FMV for tax purposes rather than face, what would they say if someone was to pay their taxes in the gold coins? Would they only count them at face?
2) If someone were to pay a debt to an individual in a legal tender coin with a FMV in excess of face value, and the recipient was unaware that the coin was worth more than face, could they then be in trouble for under-reporting income. (As a realistic example, suppose the coins were modern ones made of silver, maybe 1965 to 1969 40% silver Kennedy Half Dollars, or even crack open a sliver proof set and pay in Silver State Quarters.)
-Fuzz
<< <i>While I realize that it is bad public policy to let people escape paying taxes by doing this "paid in gold coin" scam and that the government is not going to let anyone get away with it because if they did, then everyone would start doing it.
I looked up the cases cited and they do hold that when paid in gold or silver coins worth more than face value, you owe income tax on the fair market value. However each case was a specific situation and those situations may not be the same as the one in the current case.
One of the cases cited involved a distribution from a corporation. It paid out dividends to the shareholder in $20 gold double eagles. In that case, there is a specific IRS law saying that dividends are taxable and the tax included fair market value.
Another case was a lawyer, apparently a tax protester, who did legal work for $1,000 but took 200 silver dollars in payment. He then paid the tax on the fair market value and then sued to get a refund. (Note: That is a good CYA method.) In that case the court ruled that since the coins were covering a debt, that the fair market value was $1,000. (At the time each silver dollar was actually worth $5 each.) I wonder if he had been paid 1000 silver dollars, what grounds they would have used to rule against him. Also, it seems like the court treated the guy pretty nice considering that he broke some court rules including filing an appellate brief over twice the limit and after he requested special permission to do so and was denied.
Now I'm left wondering a few things.
1) If the IRS claims that a gold coin is worth FMV for tax purposes rather than face, what would they say if someone was to pay their taxes in the gold coins? Would they only count them at face?
2) If someone were to pay a debt to an individual in a legal tender coin with a FMV in excess of face value, and the recipient was unaware that the coin was worth more than face, could they then be in trouble for under-reporting income. (As a realistic example, suppose the coins were modern ones made of silver, maybe 1965 to 1969 40% silver Kennedy Half Dollars, or even crack open a sliver proof set and pay in Silver State Quarters.)
-Fuzz >>
Fuzz--
Great comments, and I would expect nothing less from a law student. I need to think about your questions a little bit (don't you know that I am the one who asks the questions around here?
Didn't wanna get me no trade
Never want to be like papa
Working for the boss every night and day
--"Happy", by the Rolling Stones (1972)
The fact is that they will have to pay all the back taxes plus the interest and penalties no matter the outcome of the criminal trial. This does not require any charges or trial, just a ruling from you friendly IRS agent.
What is interesting though, whether it is gold coins or rotten eggs, is that using the FMV to calculate the tax does not figure in liquidity. Suppose you accepted as you sole source of income payment in an extremely illiquid asset. The IRS would not allow you to pay your tax in that asset per FMV and you might not be capable of turning some of the asset into cash. It could have been pay in 100% Enron stock right before the collapse for instance. There at least you could balance short term losses on the return, but wouldn't get around the Social Security, Disability, ... taxes.
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