According to the article, the IRS only has instructions dealing with collectible coins that are out of circulation. The coins he used were still in circulation.
Uh, yeah, but if all he did was place a low value on the coins, then his business is going to have artificially high profits, so the net result is that he goes to court over paying corporate income taxes instead of payroll taxes plus paying his people enough for their Federal taxes.
For example, if he earns $60, and his expense is paying someone $50, either:
a) He pays them $50, they pay taxes on that $50, and he pays taxes on the $10, or
b) He does his coin trick, they pay taxes on, say, $5, and he pays taxes on $55 (because he gives the coins a low value).
If all he's doing is buying something at one price, writing down its value, and giving it away, then anyone can do this. Try it with shares of a privately-held company, or golf club memberships, or anything that doesn't freely trade.
Yes, but legal tender does freely trade. So, what if you decided to pay your workers in cash? You contract a company to handle this for you, and hauling all those bills is a huge pain in the butt, so they charge you $X over the value of the bills that get handed out to your workers. What if you had each stack of bills individually wrapped in a satin ribbon, resulting in an even higher service fee? Aren't you doing the same thing?
I'm sorry, but I don't understand what you're trying to say. In the case you mentioned, there's an extra cost, but neither the business nor the employees are paying it. In the case I'm talking about, all he ended up doing was making the choice to pay corporate taxes instead of paying approximately the same amount in higher wages.
It's like breaking into a store in order to steal something, and then leaving behind enough money to pay for it. Pointlessly flouting the law.
That's not the transaction for which you would be taxed. But if you're paying your workers something that you claim is worth $50, for which you spent $950, that $900 difference is money that would be an expense if you paid them normally. Instead, it's profit, and you owe $300 in taxes on it -- even though you have the negative cash flow from your $950 coin.
That's what's missing from the story. Either we're reading it wrong, or what he committed was a conventional tax fraud with a gold-bug spin.
