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Bitcoin, Silver, & Capital Gains Tax PDF Print E-mail
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Written by expanton   
Monday, 27 June 2011 21:00

By: Eric Arthur Blair

As far as I understand it, the rule is you owe capital gains the moment you receive federal reserve notes (or other national fiat reserve notes in some cases) . At the end of the tax year you tally up all the notes spent and notes earned and the result is the actual gain that is taxed. In order for the IRS to collect taxes they need to be able to assign a market value for the capital in question.


If some one was looking to reduce their tax liability might use Bitcoins in exchange for other capital, or goods you use every day which are usually purchased with federal reserve notes. By doing so this further complicates the tax liability issue for the IRS because the burden of proof is now on them to assign a market value to 2 goods instead of just one, and again multiplied over many more transactions. Another pitfall to avoid is assigning a dollar value to any item ever. Legal tender means you are required to accept it for debts, but no where does it say that that you must convert to FRNs or use them as a index of value.


A quick search on "linden tax revolt" will show a plethora of stories related to the subject we are discussing here. There are very clear differences between Bitcoins and Linden Dollars (Second Life currency), but these precedents could pave the way for future taxation issues with Bitcoin. A similar taxation question is raised in regard to the silver and gold bullion that is constitutionally required to be issued by the federal government of the US. It may for example have a face value of $1, but contain metal bullion that is worth $35 to $50 in metal value alone. Since this coin is legal tender, you can legally accept it as payment at face value, and again the capital gains tax liability issue comes up at the moment of conversion back to FRNs.


"No Federal Court of Appeals has ever ruled that the gold coins in question must be reported to the IRS based on FRN market value."


This is an example of this tax strategy taken to the extreme. In this case the individual won. Others were not so educated. Again and again he downfall seems to be declaring the Federal Reserve Note value of any of the capital in question. Without willingly doing so yourself you leave the burden of proof on the IRS to establish market value. This is not an easy thing to do with a volatile economy like precious metals or even Bitcoins. As with any individual challenging the status quo (lawfully or otherwise), the path is bound to be filled with pitfalls. It is a question of how far you as an individual choose to go in freeing yourself economically or otherwise.


Years later this same man signed the papers that ended up imprisoning him. He accepted and sold precious metal US legal tender coins at face value, which is legal. The moment he supposedly broke the law was when he claimed the coins as a business expense at market value. By doing so he declared a federal reserve note market value of the capital by his own volition, handing the conviction to the prosecution in the process. Additionally this type of dualistic book keeping was likely an additional mistake. Some of his family also claimed the coins at face value for income purposes, but then at market value for loans, again voluntarily declaring the federal reserve note market value, as well as practicing this questionable dual value book keeping. If you don't want to pay for the system, you had better not be using it AT ALL, or else they own you.


Corporate society is structured in such a way to make sure that the tax liability is pinned onto the end user, and not the corporation. They can mandate the use of federal reserve notes because they are a private entity. You can choose not to deal with them, but this is simply not an option, or too difficult in some industries. Because they assign an FRN value to the goods and services, you thru completing this transaction in FRNs contractually agree to the FRN market value of the capital. Don't use federal reserve notes. Don't assign a federal reserve note market value to any capital. The only winning strategy is not to play.


The federal reserve system is VOLUNTARY. If you do not use the system you are not liable for taxes paid into it. The moment you use federal reserve notes you give your consent to being bound by this contractual agreement. Most people don't understand that your income taxes don't go to build roads and schools, 100% of it goes directly to the PRIVATE bank known as the federal reserve. All the services that help maintain our communities are paid for with your property and sales taxes within the state. The federal reserve system is a giant black hole imploding our economy, as well as the worlds. For the love of god stop feeding it!


Again back to the strategy of never declaring Federal Reserve note value to any capital, you have precious metals investors long aware of this situation to some degree. Now enter Bitcoin, a system that not only separates the metal value from the FRN system, it also creates a possibility for near complete anonymity (if you make the effort), as well as a decentralized payment processing structure that has no reporting obligations to the IRS. I predict this is going to create a HUGE inductive effect to metals investors.


This is already happening to some degree on Bitcoin trading networks, especially with silver prices stagnating lately and BTC jumping all over. Precious metals and Bitcoin are a marriage made in heaven, and they will produce many offspring.



The above is not tax advice, or a recommendation to buy or sell any investment instrument.

Last Updated on Friday, 08 July 2011 01:52

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Comments (1)
1Sunday, 25 March 2012 11:45
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