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Here is the conundrum that the IRS is in.. The US Government has placed a face value on the coins, a 1-ounce gold coin is marked 50 US Dollars. The intrinsic

Here is the conundrum that the IRS is in.. The US Government has placed a face value on the coins, a 1-ounce gold coin is marked 50 US Dollars. The intrinsic value of that coin today is right around $1000. IF they argue that intrinsic value should be the determining factor, then what is the intrinsic value of a paper $20 bill (really about 5 cents of paper and ink)? IF the IRS states that face value of the $20 bill is established by the US Government, then the face value of the $50 gold coin must also be taken at its face value - after all, the face value of the coin was established by the same government that established the paper bill's value. I hope I have explained this right... the IRS cannot argue intrinsic value vs. face value without falling into a ditch. I think this is what the defense is counting on.

sethg 17y ago
I don't see any conundrum. I don't know what the actual IRS rules are, but common sense tells me that if I am paid with some commodity (dollar bills, silver coins, buckets of crude), then my income for tax purposes is the market value of that commodity. A $20 bill has a market value of $20. A one-ounce gold coin marked "$50" has a market value of about $1000. If aliens shower us with free gold, and the price of gold drops to $40 an once, then we can start caring about the face value of the one-ounce gold coin.
- noodle 17y ago
  the gold is more than a commodity, it is legal US tender. its illegal to scrap pennies for their precious metals. why is it different for the gold coins, which you must do in order to pull the market value out of them?
  - stcredzero 17y ago
    You sell them off, and it's someone else's problem. (Possibly they take them overseas? It can't be done legally, but it would be someone else breaking the law.)
  - deleted 17y ago
    [deleted]
- stcredzero 17y ago
  The problem is the nebulousness of "market value." What if someone finds out that one of their payroll bills has a highly sought-after printing error that makes it worth 100X the face value? Then, what if it's subsequently discovered that it's not a real example of the printing error, but that the error was faked? How are you going to determine market value? Most of the time a regulation or a contract will name some widely-used index. Unfortunately, the most widely used index for legal tender is "multiplicative identity."
  - sethg 17y ago
    I don't see how "market value" is any more nebulous a concept than the "intrinsic value" people are mentioning elsewhere in this thread. Why is gold worth (google google...) $950 an ounce? Because there are lots of people who are willing to buy your ounce of gold for $950, or sell you an ounce of gold $950. That's market value. Why is my $20 bill worth $20? Because any bank in the US will let me deposit or exchange it for $20.
  - jerf 17y ago
    There is no intrinsic value. There is no unchanging market value. There is only the market value now, and the market value it used to have, and for that matter the definition of "market" isn't terribly obvious either, though the only ones that matter are "people I can actually sell the thing to" and "the average of the market for some purpose or other". This is the way it is. Complaining about it doesn't change anything. Market value may be nebulous, but it's the least nebulous meaningful definition of "value" there is for commerce. (This is why I can't even be a "goldbug". The idea that gold has intrinsic value is patently absurd, because there is no such thing as "intrinsic value". And once you are reduced to arguing that "Well, historically it's been a good investment" it is simply one commodity amoungst many and the argument is over, because now gold isn't special.)
    - stcredzero 17y ago
      I never commented in support of "intrinsic value." Specifically, the "market value" of legal tender is arguably problematic. There are well established instruments that can be used to determine the market values of things like cars and electricity and the metals in coins. However, "legal tender" status has a clear precedent for confounding this. A penny is a penny, and an employer who pays with older coins whose copper and nickel content is worth more than their face value wouldn't be liable for additional tax.
- patrickg-zill 17y ago
  You would be right, if the coins were not made by the US Government and marked "$50". What is the IRS going to say, that the US Mint is guilty of counterfeiting?
elai 17y ago
Couldn't legislation state that all gold and silver coins are not legal tender anymore but just hunks of metal. For anyone who wishes to "get a refund" they can trade their gold and silver coins for paper bills by mailing them at a US treasury address.
- wmf 17y ago
  That sounds like a reasonable long-term solution (I never understood why the US mints coins with fake denominations anyway), but it wouldn't apply to this case.
pj 17y ago
There is an economic law called Gresham's law. It says in a scenario where there are two coins with different intrinisic values, the coin with the higher intrinsic value will disappear from circulation. http://chestofbooks.com/finance/banking/Banking-And-Currency/Chapter-III-Gresham-s-Law.html http://chestofbooks.com/finance/banking/Banking-And-Currency... As an example, pennies used to be made of solid copper. When they introduced the zinc filled coins, the solid ones all but disappeared. You can still find some if you look carefully. The reason is because the value of the copper in a full copper penny was actually worth more than one penny, so people collected them, melted them down, and sold the copper. Of course this is illegal, but the laws of nature are stronger than laws of man.

sethg 17y ago

I don't see any conundrum. I don't know what the actual IRS rules are, but common sense tells me that if I am paid with some commodity (dollar bills, silver coins, buckets of crude), then my income for tax purposes is the market value of that commodity. A $20 bill has a market value of $20. A one-ounce gold coin marked "$50" has a market value of about $1000. If aliens shower us with free gold, and the price of gold drops to $40 an once, then we can start caring about the face value of the one-ounce gold coin.

noodle 17y ago
the gold is more than a commodity, it is legal US tender. its illegal to scrap pennies for their precious metals. why is it different for the gold coins, which you must do in order to pull the market value out of them?
- stcredzero 17y ago
  You sell them off, and it's someone else's problem. (Possibly they take them overseas? It can't be done legally, but it would be someone else breaking the law.)
- deleted 17y ago
  [deleted]
stcredzero 17y ago
The problem is the nebulousness of "market value." What if someone finds out that one of their payroll bills has a highly sought-after printing error that makes it worth 100X the face value? Then, what if it's subsequently discovered that it's not a real example of the printing error, but that the error was faked? How are you going to determine market value? Most of the time a regulation or a contract will name some widely-used index. Unfortunately, the most widely used index for legal tender is "multiplicative identity."
- sethg 17y ago
  I don't see how "market value" is any more nebulous a concept than the "intrinsic value" people are mentioning elsewhere in this thread. Why is gold worth (google google...) $950 an ounce? Because there are lots of people who are willing to buy your ounce of gold for $950, or sell you an ounce of gold $950. That's market value. Why is my $20 bill worth $20? Because any bank in the US will let me deposit or exchange it for $20.
- jerf 17y ago
  There is no intrinsic value. There is no unchanging market value. There is only the market value now, and the market value it used to have, and for that matter the definition of "market" isn't terribly obvious either, though the only ones that matter are "people I can actually sell the thing to" and "the average of the market for some purpose or other". This is the way it is. Complaining about it doesn't change anything. Market value may be nebulous, but it's the least nebulous meaningful definition of "value" there is for commerce. (This is why I can't even be a "goldbug". The idea that gold has intrinsic value is patently absurd, because there is no such thing as "intrinsic value". And once you are reduced to arguing that "Well, historically it's been a good investment" it is simply one commodity amoungst many and the argument is over, because now gold isn't special.)
  - stcredzero 17y ago
    I never commented in support of "intrinsic value." Specifically, the "market value" of legal tender is arguably problematic. There are well established instruments that can be used to determine the market values of things like cars and electricity and the metals in coins. However, "legal tender" status has a clear precedent for confounding this. A penny is a penny, and an employer who pays with older coins whose copper and nickel content is worth more than their face value wouldn't be liable for additional tax.
patrickg-zill 17y ago
You would be right, if the coins were not made by the US Government and marked "$50". What is the IRS going to say, that the US Mint is guilty of counterfeiting?

elai 17y ago

Couldn't legislation state that all gold and silver coins are not legal tender anymore but just hunks of metal. For anyone who wishes to "get a refund" they can trade their gold and silver coins for paper bills by mailing them at a US treasury address.

wmf 17y ago
That sounds like a reasonable long-term solution (I never understood why the US mints coins with fake denominations anyway), but it wouldn't apply to this case.

pj 17y ago

There is an economic law called Gresham's law. It says in a scenario where there are two coins with different intrinisic values, the coin with the higher intrinsic value will disappear from circulation. http://chestofbooks.com/finance/banking/Banking-And-Currency/Chapter-III-Gresham-s-Law.html http://chestofbooks.com/finance/banking/Banking-And-Currency... As an example, pennies used to be made of solid copper. When they introduced the zinc filled coins, the solid ones all but disappeared. You can still find some if you look carefully. The reason is because the value of the copper in a full copper penny was actually worth more than one penny, so people collected them, melted them down, and sold the copper. Of course this is illegal, but the laws of nature are stronger than laws of man.