While the tax movement laments the lack of media coverage for the latest perceived victory, I wonder how they'll report the news when the government collects the taxes civilly? Will they lament the lack of media coverage at that point?
Did they report the money Kuglin paid in her stipulated agreement? You can still find media coverage of her supposed victory but precious little on her capitulation. Wonder why that never makes the news? Even the tax protest circuits?
Will Bob Schulz report the news when Tommy Cryer pays? Or, Robert Kahre? By the way, I'd think there's still a chance he will be retried if simply because of his RICO suit.
Big loss for the DOJ
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Demosthenes
- Grand Exalted Keeper of Esoterica
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For the key defendants, it was hung jury which means there'll be a retrial. That just ain't big news for the average newspaper reader.
As for the core tax issue, that was already ruled a losing argument by the 9th Circuit.
As for the core tax issue, that was already ruled a losing argument by the 9th Circuit.
Last edited by Demosthenes on Tue Oct 02, 2007 12:43 pm, edited 1 time in total.
Demo.
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ASITStands
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Since reading the stuff IMFResearch posted at Lost Horizons, I've done a bit of research myself and found Rev. Stat. 3178.Demosthenes wrote:For the key defendants, it was hung jury which means there'll be a retrial. That just ain't big news for the average newspaper reader.
As for the core tax issue, the defendants already lost in civil court.
How does the dollar/FRN thing play out? I know that's an emotionally-charged subject, even for this forum, but it's a question inquiring minds want answered.
It seems to me R.S. 3178 settles the question.
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Demosthenes
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United States v. Loglia
No. 2:05-cr-00121-RCJ-(RJJ)
Document Date: January 5, 2007
D. Nev.
Jan. 5, 2007
________________________________________
UNITED STATES DISTRICT COURT
DISTRICT OF NEVADA
2:05-cr-00121-RCJ-(RJJ)
UNITED STATES OF AMERICA
Plaintiff,
v.
ALEXANDER LOGLIA, et al.;
Defendants.
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 fact-finder 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
No. 2:05-cr-00121-RCJ-(RJJ)
Document Date: January 5, 2007
D. Nev.
Jan. 5, 2007
________________________________________
UNITED STATES DISTRICT COURT
DISTRICT OF NEVADA
2:05-cr-00121-RCJ-(RJJ)
UNITED STATES OF AMERICA
Plaintiff,
v.
ALEXANDER LOGLIA, et al.;
Defendants.
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 fact-finder 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
Demo.
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ASITStands
- 17th Viscount du Voolooh
- Posts: 1088
- Joined: Thu Oct 06, 2005 5:15 pm
Couple of interesting quotes:
The order regarding the motion in limine continues:
Anyway, that settles the question, as far as this case is concerned, in my opinion. It would appear most of the Chris Hansen stuff is posturing. Still might be an interesting case.
Perhaps this explains the comments of Schulz: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."
...
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).
And, of course, the last part of that comment is factually error in regard to the direct, unapportioned tax argument.The Defendants also argued that regardless of the valuation of the coins for internal revenue purposes, there is no law that requires average American workers to file or pay direct, un-apportioned taxes on the fruits of their labor.
The order regarding the motion in limine continues:
Many in the tax movement fail to realize the most important issue in any of these cases that are supposed victories is the element of willfulness. A good faith defense is normally the only issue of any relevance, as far as I can see.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.
Anyway, that settles the question, as far as this case is concerned, in my opinion. It would appear most of the Chris Hansen stuff is posturing. Still might be an interesting case.
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Demosthenes
- Grand Exalted Keeper of Esoterica
- Posts: 5773
- Joined: Wed Jan 29, 2003 3:11 pm
671 F.2d 367, *; 1982 U.S. App. LEXIS 21029, **;
82-1 U.S. Tax Cas. (CCH) P9275; 49 A.F.T.R.2d (RIA) 1353
WARREN C. CORDNER and EVELYN C. CORDNER, Plaintiffs-Appellants, vs. UNITED STATES OF AMERICA, Defendant-Appellee.
No. 80-5459
UNITED STATES COURT OF APPEALS, NINTH CIRCUIT
671 F.2d 367; 1982 U.S. App. LEXIS 21029; 82-1 U.S. Tax Cas. (CCH) P9275; 49 A.F.T.R.2d (RIA) 1353
January 8, 1982, Argued
March 15, 1982, Decided
JUDGES: Before CHAMBERS, KENNEDY, and SCHROEDER, Circuit Judges.
OPINION BY: KENNEDY
OPINION
[*368] Appellants own substantially all the outstanding shares of stock of First Thrift Investors, a California corporation, and they received 275 $ 20 Double Eagle gold coins as a corporate dividend distribution. The coins had been purchased by a First Thrift wholly-owned [**2] subsidiary at their fair market value and had been distributed to First Thrift Investors as a dividend. Appellants reported the dividend at the face value of the coins, $ 5,500, but, upon audit, the Commissioner of Internal Revenue charged appellants with a taxable dividend in an amount equal to the fair market value of the coins, which was $ 70,936. In the refund action brought by appellants below, after they had paid the deficiency under protest, the district court granted the Commissioner's motion for summary judgment.
Under section 301 of the Internal Revenue Code, the amount of any corporate distribution to non-corporate distributees, for dividend purposes, is "the amount of money received, plus the fair market value of the other property received." I.R.C. § 301(b)(1)(A). We have no difficulty in holding that the gold coins here, though legal tender and hence "money" for some purposes, are also "property" to be taxed at fair market value because they have been withdrawn from circulation and have numismatic worth. California Federal Life Insurance Company v. Commissioner, 76 T.C. 107, 111 (1981) (gold coins, though legal tender, are property and not money for [**3] purposes of similarly worded I.R.C. § 1001(b), defining amounts realized from sale).
When legal tender, by reason of its value to collectors or the intrinsic worth of its contents, has a fair market value in excess of its face value or tender, then it should be deemed property other than money for purposes of section 301(b)(1)(A). See California Federal Life Insurance Company v. Commissioner, supra; cf. Joslin v. United States, 666 F.2d 1306, 81-2 U.S. Tax Cas. (CCH) 9813 (10th Cir. 1981) (per curiam), aff'g. 81-2 U.S.T.C. (CCH) P 9643 (D.Utah March 23, 1981) (silver coins received for legal services are taxed at fair market value). See also In re Midas Coin Company, Inc., 264 F. Supp. 193 (E.D.Mo.1967), aff'd sub nom. Zuke v. St. Johns Community Bank, 387 F.2d 118 (8th Cir. 1968) (treating coins having appreciated numismatic value as "goods" under Uniform Commercial Code).
AFFIRMED.
82-1 U.S. Tax Cas. (CCH) P9275; 49 A.F.T.R.2d (RIA) 1353
WARREN C. CORDNER and EVELYN C. CORDNER, Plaintiffs-Appellants, vs. UNITED STATES OF AMERICA, Defendant-Appellee.
No. 80-5459
UNITED STATES COURT OF APPEALS, NINTH CIRCUIT
671 F.2d 367; 1982 U.S. App. LEXIS 21029; 82-1 U.S. Tax Cas. (CCH) P9275; 49 A.F.T.R.2d (RIA) 1353
January 8, 1982, Argued
March 15, 1982, Decided
JUDGES: Before CHAMBERS, KENNEDY, and SCHROEDER, Circuit Judges.
OPINION BY: KENNEDY
OPINION
[*368] Appellants own substantially all the outstanding shares of stock of First Thrift Investors, a California corporation, and they received 275 $ 20 Double Eagle gold coins as a corporate dividend distribution. The coins had been purchased by a First Thrift wholly-owned [**2] subsidiary at their fair market value and had been distributed to First Thrift Investors as a dividend. Appellants reported the dividend at the face value of the coins, $ 5,500, but, upon audit, the Commissioner of Internal Revenue charged appellants with a taxable dividend in an amount equal to the fair market value of the coins, which was $ 70,936. In the refund action brought by appellants below, after they had paid the deficiency under protest, the district court granted the Commissioner's motion for summary judgment.
Under section 301 of the Internal Revenue Code, the amount of any corporate distribution to non-corporate distributees, for dividend purposes, is "the amount of money received, plus the fair market value of the other property received." I.R.C. § 301(b)(1)(A). We have no difficulty in holding that the gold coins here, though legal tender and hence "money" for some purposes, are also "property" to be taxed at fair market value because they have been withdrawn from circulation and have numismatic worth. California Federal Life Insurance Company v. Commissioner, 76 T.C. 107, 111 (1981) (gold coins, though legal tender, are property and not money for [**3] purposes of similarly worded I.R.C. § 1001(b), defining amounts realized from sale).
When legal tender, by reason of its value to collectors or the intrinsic worth of its contents, has a fair market value in excess of its face value or tender, then it should be deemed property other than money for purposes of section 301(b)(1)(A). See California Federal Life Insurance Company v. Commissioner, supra; cf. Joslin v. United States, 666 F.2d 1306, 81-2 U.S. Tax Cas. (CCH) 9813 (10th Cir. 1981) (per curiam), aff'g. 81-2 U.S.T.C. (CCH) P 9643 (D.Utah March 23, 1981) (silver coins received for legal services are taxed at fair market value). See also In re Midas Coin Company, Inc., 264 F. Supp. 193 (E.D.Mo.1967), aff'd sub nom. Zuke v. St. Johns Community Bank, 387 F.2d 118 (8th Cir. 1968) (treating coins having appreciated numismatic value as "goods" under Uniform Commercial Code).
AFFIRMED.
Demo.
-
Demosthenes
- Grand Exalted Keeper of Esoterica
- Posts: 5773
- Joined: Wed Jan 29, 2003 3:11 pm
New superseding indictment in this case. I bet Schulz doesn't update his followers...
http://www.cheatingfrenzy.com/kahre1671.pdf
http://www.cheatingfrenzy.com/kahre1671-1.pdf
http://www.cheatingfrenzy.com/kahre1671.pdf
http://www.cheatingfrenzy.com/kahre1671-1.pdf
Demo.