Tuesday, March 29, 2011

Why A Dollar Is A Dollar

On 2015 02 18 I revisit this article to mention that the US Government and agencies have very devious ways of claiming the face value of Federal Reserve Notes (FRNs) US minted bullion coins of the same denomination, when it suits them to do so, and to declare that such bullion coins actually have their numismatic value, and not their face value, when it suits them to do so.  The IRS claims such coins you receive have numismatic value, and the US Court claims such coins you spend have only the face value.  I do not advise getting into a contest with the IRS over this unless you have an awful lot of bullion to spend for legal expenses.

Bob Hurt

Copyright © 29. March 2011 by Bob Hurt. All Rights Reserved.

Introduction – the US Creates Money

The United States Government provides a variety of forms of money for people to use in commercial transactions. The Constitution gives Congress authority to levy the value of the dollar, the unit of currency.

The Value of a Dollar

Last time Congress did so, it set the value of the dollar to 371.25 grains of fine silver, about $1.26 per ounce. Silver sells today for $36.89 per ounce, and gold for $1417.16 per ounce (see http://xe.com), not counting the broker fee. Bullion Silver Eagle ($1) and Gold Eagle ($50) coins cost more because of the minting fee. So,what gives?

Inflation from Deficit Spending Destroys Currency Values

Simply, the government has messed up our money, destroying its value in precious metals through inflation which Congress caused by deficit spending and “bailouts” of players in the banking, finance, and insurance industries.

Congress Removed Precious Metals from Circulating Coins

Years ago, Congress removed precious metals from circulating coins and put the metals (gold, silver, platimum) only in numismatic coins. See the advertisements at http://www.usmint.gov.
Congress mandated the circulation of US dollars in “legal tender” currency known as “Federal Reserve Notes” (FRNs) in denominations of $1, $5, $10, $20, $50, and $100, and coins in 1, 5, 10, 25, and 50 cents. Congress has effectively removed all others from general circulation.
So what can you do when $1 as a US minted “bullion” silver dollar costs you $38 in FRNs?

What to Do about Currency Devaluation

Buy Precious Metal Coins

To begin with, you ought to start purchasing silver and gold coins. Remember that today's $38 Silver Eagle dollar cost only $5 ten years ago. Many consider silver grossly under-valued. That will probably change as inflation drives the price upward, as it has gold. Thus, silver looks like a better buy right now than gold. Some think the price of gold will exceed $5000 an ounce in the near future. If you don't buy something that goes up in value, your FRN currency will become worth ever less as time goes by.

Save Gold and Silver Coins, not Currency

It seems insane, in other words, to save FRN's such as in a bank savings acount or under the mattress.
Remember, though that the price of precious metals does go down as well as up. If Congress and the Federal Reserve take actions to improve the value of the dollar, precious metals will fall in price. I don't consider that likely within the next 5 years. LOOK at the inflation table to see the trend of FRNs. The inflation (devaluation) rate went up in all but 9 of the past 134 months. That means the buying power of FRN dollars goes down every month. So if you have $40 lying around, go buy a Silver Eagle with it, and if you have $1500 lying around, go buy a Gold Eagle with it. As the inflation rate goes up and the FRN value goes down, your eagles will fly ever higher, and you will smile when you think about it. That's Not All – You can LEVERAGE the Money System

How to Leverage the Money System

Avoid Tax Crimes

Robert Kahre of Las Vegas hates the Federal Reserve AND the IRS. He business associates began paying themselves and employees in gold and silver coin instead of FRNs. He also stopped filing tax returns and withholding taxes from employee pay. Not having a sensible strategy for dealing with the income tax issue, a jury convicted him in 2009 of tax crimes. But earlier juries exonerated him and his associates he from over 100 counts related to avoiding tax by paying employees in gold and silver coins. See these links for more info:

Demand Specie for Taxable Income

You see, when you receive taxable income in the form of a Gold Eagle, you report its face value of $50 on any tax return. You don't report its numismatic value of $1417+. Why? Because “a dollar is a dollar.”
On 2 October 2008 the 5th US Circuit Court of Appeals proved this point with crystal clarity in its opinion for the Crummey v Klein case. The IRS might hate it, but they can't do a thing about it. I have appended the docket report and the opinion below.

Because A Dollar is A Dollar

Essentially, Crummey presented Klein a Gold Eagle for payment of taxes. Klein said the tax came to more than $50, the face value of the coin, and demanded more. Crummey said the coin had a higher actual value, and a dispute arose. Crummey sued. The 5th Circuit settled the matter by opining “...a dollar is a dollar.” By that the panel meant a dollar in any form equals the value of a dollar in any other form, regardless of their acquisition prices.
As a personal finance or business strategy, it makes sense to accept taxable income only in the form of specie (“lawful money” gold and silver coins of the realm). So if you sell a $150,000 house, put the equivalent price in Gold Eagles in the purchase agreement. At $1500 per coin, the buyer would need to pay you 100 coins. You would declare the face amount of $5,000 ($50 per coin times 100 coins) as income on any tax return. If the house cost you $100,000, you would have a tax credit on the difference of $95.000.

Slippery, but Blame Congress

Oh, this seems a little slippery to you? I agree, but the fault lies with the Congress and Federal Reserve, not with you. You have the legal right and duty to minimize your tax obligations by every legal means necessary. And you have a 5th Circuit ruling to support the legality of your choosing the most tax-advantageous form of money to accept.

Pay Tax-Deductible Money in FRNs

Additionally, you ought to pay tax-deductible money in the form having the most terrible value: FRNs.
I would advise no one to inform the IRS of this strategy because the IRS might then do to you what it did to Robert Kahre, drag out a microscope and find something on which to win a conviction. You don't want them hating your guts.

Using the Coin Broker

You might seek out a reputable coin dealer in your area to handle the transaction easily for you. You would settle with the dealer in advance on the specific cost for the specie, including brokerage fee. You would make up an order in the name of your payor to the dealer to pay you a specific number of coins of specific metal content and face value. The payor would cover the brokerage fee or not, based on your agreement with the payor and dealer. You would not put the cost in FRNs on the form. Instead, have the broker make up a separate receipt for the cost. You would give the form to the payor. The payor would sign it and attach a check or certified fund instrument, then send it to the dealer. The dealer would deliver the coins to you and the receipt to the payor, concluding the transaction of payment.
In the event you needed FRNs for paying bills and living expenses, you would trade some of the coins back to the broker for FRNs. The broker might forgive the brokerage fees on this transaction.

Crummey v Klein Docket and Opinion

See the following pages for the Docket Report and the 5th Circuit's Crummey v Klein opinion. I have uploaded the opinion I downloaded from Pacer.gov to http://www.scribd.com/doc/51812506.
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General Docket
United States Court of Appeals for the 5th Circuit
Court of Appeals Docket #: 08-20133
Docketed: 02/29/2008
Termed: 10/02/2008
Nature of Suit: 3370 Other Fraud
Crummey v. Klein Indep Sch Dist, et al
Appeal From: Southern District of Texas, Houston
Fee Status: fee paid
Case Type Information:
     1) Private Civil Federal
     2) Private

Originating Court Information:
     District: 0541-4 : 4:07-CV-1685
     Ordering Judge: Sim T. Lake, III, U.S. District Judge
     Date Filed: 05/21/2007

     Date NOA Filed:      Date Rec'd COA:

     02/27/2008      02/27/2008

06/17/2008    Motion filed by Appellant Brent E Crummey alternative request for an evidentiary hearing [6051522-1] Date of COS: 6/16/08 Sufficient [Y/N]: y [08-20133] (INCORPORATED IN RESPONSE TO MOTION TO FOR DAMAGES) (SUB TO SCR JUDGE & PANEL) (AS)
06/25/2008    Briefing Complete. [08-20133] Reply brief ddl canceled. (AS)
10/02/2008 Opinion filed. Mandate pull date is 10/23/08. [08-20133] (JMA)
10/02/2008    COURT Order filed denying as moot appellant's motion for an evidentiary hearing [6051522-1], denying appellee's motion for damages under Rule 38 [6043200-1] (HANDLED IN OPINION) (WED,EMG,ECP) Copies to all counsel. [08-20133] (JMA)
10/02/2008 Judgment entered and filed. [08-20133] (JMA)
10/06/2008 Bill of costs filed by Appellee Klein Indep Sch Dist, Appellee Thomas Petrek, Appellee Deborah H Wehner. Sufficient [Y/N]: Y . [6130376-1] [08-20133] (CPD)
10/16/2008 Petition filed by Appellant Brent E Crummey for rehearing. # of copies filed: 4 [6137765-1] Mandate pull date canceled. Date of COS: 10/15/08 Sufficient [Y/N]: Y [08-20133] (CPD)
11/12/2008 COURT Order filed denying petition for rehearing [6137765-1] Mandate pull date is 11/19/08. (EMG) Copies to all counsel. [08-20133] (CPD)
11/20/2008 Mandate issued. Approved BOC Issued (Y/N)?: Y [08-20133] Mandate pull date satisfied. (CPD)
11/20/2008    Record on appeal returned to USDC. Electronic ROA Recycled:[Y/N] Y. [08-20133] (CPD)
No. 08-20133 Summary Calendar
2008 U.S. App. LEXIS 20981
October 2, 2008, Filed

PRIOR HISTORY: [*1] Appeal from the United States District Court for the Southern District of Texas. 4:07-CV-1685.

COUNSEL: For BRENT E CRUMMEY, Plaintiff - Appellant: Brent E Crummey, Scottsdale, AZ.

For KLEIN INDEPENDENT SCHOOL DISTRICT, THOMAS PETREK, DEBORAH H WEHNER, Defendants - Appellees: David M Feldman, Ellen Huchital Spalding, Adam David Courtin, Feldman, Rogers, Morris & Grover, Houston, TX.

JUDGES: Before DAVIS, GARZA, and PRADO, Circuit Judges.


* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5THCIR. R. 47.5.4.
Brent E. Crummey brought this lawsuit complaining that the defendants/appellees, Klein Independent School District ("KISD") and two employees of the KISD tax office, declined to accept Crummey's fifty-dollar United States American Eagle gold coins for any more than the face value of the coins in Federal Reserve Note dollars as tender in payment for taxes Crummey owed. Crummey, proceeding pro se, sought to assert various federal and state causes of action arising from this incident, including that the appellees violated Crummey's alleged right under Article 1, Section 10 of the Constitution [*2] to pay a debt in gold coin. 2 The district court, adopting the Memorandum, Recommendation and Order of the Magistrate Judge, dismissed sua sponte Crummey's federal claims and declined to exercise supplemental jurisdiction over Crummey's remaining state law claims,which were remanded to state court. Crummey appeals.

2 Article 1, Section 10 of the Constitution provides, in part: "No State shall . . . make any Thing but gold and silver Coin a Tender in Payment of Debts."

The core of Crummey's appeal rests on Crummey's argument that the legal monetary value of fifty dollars in United States American Eagle gold coin is different than (and worth more than) the legal monetary value of fifty dollars in Federal Reserve Notes, or as it is sometimes affectionately called, cash. Regardless of any currency confusion that may have arisen in bygone eras, our present standard is clear: As legal tender, a dollar is a dollar.

Crummey suggests that the United States has a parallel or dual monetary valuation system for the dollar. Crummey relies for support on a statute authorizing the Secretary of the Treasury to mint certain coins and to sell them to the public at a price based on the market value of the [*3] bullion plus production costs. See 31 U.S.C. § 5112(f)(1). According to Crummey, the fact that the United States Mint sells coins into circulation at an amount that is often different than the face value of the coins, supports his theory for the existence of some form of dollar-for-dollar exchange rate between the "coin" dollar and the "FRN" dollar.

Crummey's argument conflates the market value of such coins as bullion, or as a collectors' items, with the value of the coins as legal tender. Fittingly, the Supreme Court has explained:

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.

Thompson v. Butler, 95 U.S. 694, 696, 24 L. Ed. 540 (1877). "United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues. Foreign gold or silver coins are not legal [*4] tender for debts." 31 U.S.C. § 5103; see also Mathes v. Commissioner of Internal Revenue, 576 F.2d 70, 71 (5th Cir. 1978) (per curiam) ("Congress has delegated the power to establish this national currency which is lawful money to the Federal Reserve System."); United States v. Wangrud, 533 F.2d 495, 495 (9th Cir. 1976) (per curiam) ("By statute it is established that federal reserve notes, on an equal basis with other coins and currencies of the United States, shall be legal tender for all debts, public and private, including taxes.").

We reject Crummey's suggestion that the "dollar" has multiple meanings or values within the United States system of currency. See 31 U.S.C. § 5101 ("United States money is expressed in dollars, dimes or tenths, cents or hundreths, and mills or thousandths. A dime is a tenth of a dollar, a cent is a hundredth of a dollar, and a mill is a thousandth of a dollar."). As legal tender, a dollar is a dollar, regardless of the physical embodiment of the currency.

The legal monetary value of Crummey's fifty dollar American Gold Eagle coin is equivalent to that of a fifty dollar Federal Reserve Note. Crummey's argument to the contrary, on which the bulk of his [*5] appeal rests, fails.

Having carefully considered all of Crummey's issues on appeal in light of the record and the applicable law, we find them to be without merit. For these reasons, the judgment of the district court is AFFIRMED.

Furthermore, appellees' motion for sanctions pursuant to Rule 38 of the Federal Rules of Appellate Procedure is DENIED. Crummey's alternative request for an evidentiary hearing on appellees' motion for sanctions is DENIED as moot.

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