Gold Confiscation
Some precious metals firms foster the circulation of many myths, misunderstandings, and outright lies about the purchase and sale of precious metals. Generally, these misconceptions and falsehoods promote the notion that the government may again call in gold as it did in 1933 and that “reportable” transactions are preludes to confiscation. By cultivating such fears in investors, unscrupulous firms can sell high-priced (and often overpriced) coins with greater margins of profit.
Avoiding Confiscation
The most frequently used technique to promote high-priced coins is to raise the issue of confiscation. Many telemarketers tell investors that old U.S. gold coins are not “subject to confiscation,” leaving the impression that modern gold bullion coins are. Consequently, many investors buy old U.S. gold coins at prices significantly higher than the value of their gold content. The idea of buying “non-confiscatable” gold sounds like a powerful argument but wilts under scrutiny.
Many precious metals firms maintain that old U.S. gold coins, proof sets, and commemorative gold coins are “collectibles” and would not be subject to another gold recall. Another notion holds that coins one hundred years or older are antiques and therefore not subject to confiscation.
No federal law or Treasury department regulation supports these contentions.
The myth that specific types of gold coins are “not confiscatable” stems from the Executive Order that President Roosevelt issued in 1933 calling in gold. The Executive Order exempted “gold coins having a recognized special value to collectors of rare and unusual coins,” but it did not define special value or collector, and certainly not collectibles. Nevertheless, telemarketers promoting old U.S. gold coins perpetuate this myth because it makes easier the selling of high-priced coins.
On December 31, 1974, with Executive Order 11825, President Gerald Ford repealed the Executive Order that Roosevelt used to call in gold in 1933. This was necessary because on the same day Congress restored Americans’ right to own gold. Furthermore, in 1977 Congress removed the president’s authority to regulate gold transactions during a period of national emergency other than war.
Even if a law did exempt certain coins from future confiscation, the government could change that law. Sadly, the government often simply ignores laws. Dealers who say they sell “non-confiscateable” gold have no basis for making such claims.
Although Roosevelt’s Executive Order required Americans to turn in their gold coins and gold bullion, foreigners continued to redeem paper dollars for gold until August 15, 1971, when President Nixon closed the gold window. From the end of World War II to 1971, our gold reserves were cut in half.
Since 1989, PCGS and NGC, the two major grading services, have “slabbed” over two million coins rated MS-60 or higher. Now, the two services are grading 200,000 to 300,000 coins a month. Millions of lower-grade coins (VF through BU) do not even warrant being submitted. Yet, they are sold as “non-confiscateable” semi-numismatic coins. Low-grade coins that have no real collector value are called semi-numismatic.
The concept of “non-confiscateable” gold is counterfeit. The idea lives only because dealers continue to push it for their own benefit. Investors who do not have the facts are unable to know otherwise.
Investors wanting to buy gold should go with the bullion coins: American Gold Eagles, Maple Leafs, or Krugerrands. These coins move dollar for dollar with the world price of gold and are easy to buy, sell, and trade. Additionally, tracking the value of these coins is easy. No “expert” has to look at them.
Your best buys in fractional-ounce gold coins are American Eagles, Canadian Maple Leafs, or Krugerrands, although fractional-ounce Krugerrands can be difficult to find at times. These coins have their gold content stamped in English and come in sizes Americans are used to dealing with. Always, these coins are cheaper than promoted European coins. Even when you find European coins at bullion prices, fractional-ounce Gold Eagles, Maple Leafs, or Krugerrands are comparably priced. There are no compelling reasons for Americans to buy European coins. Americans should buy Gold Eagles, Maple Leafs, or Krugerrands.
Reportable Purchases
Often, promoters will claim that the coins they offer are not subject to “reporting.” Such statements imply the government requires gold transactions be reported. However, no government regulations require the reporting of the purchases of any precious metals, per se. If payment is made by cash greater than $10,000, however, it becomes a “cash reporting transaction.” It is not the gold that the government wants reported but the cash. Such reporting applies to all business transactions involving more than $10,000 cash.
Regarding cash transactions, Official General Instructions for IRS Form 8300 read: “Who Must File. – Each person engaged in a trade or business who, during that trade or business, receives more than $10,000 in cash in one transaction or two or more related transactions must file Form 8300. Any transactions conducted between a payer (or its agent) and the recipient in a 24-hour period are related transactions.
This regulation applies to cash – greenbacks, paper money. It does not apply to personal checks, wire transfers, or money market withdrawals. When cashier’s checks or money orders are involved, cash reporting may be triggered.
Cash reporting requirements were not written specifically for the precious metals industry but for all businesses. The purchase of a car, boat, or jewelry, and payment with two cashier’s checks, each less than $10,000 but totaling more than $10,000, would be a reportable transaction.
Personal checks or checks drawn on the payer’s own account are not considered cash. Form 8300’s General Instructions read: “Cash does not included a check drawn on the payer’s own account, such as a personal check, regardless of the amount.”
Reportable Sales
Customer sales to dealers of certain precious metals exceeding specific quantities call for reporting to the IRS on 1099B forms. The 1099B forms are similar to other 1099 forms taxpayers commonly receive; the “B” means they have been issued by a business other than a financial entity.
Reportable sales (again, customer sales to dealers) apply to 1-oz Gold Maple Leafs, 1-oz Krugerrands, and 1-oz Mexican Onzas in quantities of twenty-five or more in one transaction. Reporting requirements do not apply to American Gold Eagles, no matter the quantities. Furthermore, reporting requirements do not apply to any fractional ounce gold coins.
Only one common silver product is reportable when sold: pre-1965 U.S. coins. The quantity that causes the filing of a 1099B, however, is not clear. The IRS bases its authority to require reporting on CFTC-approved contracts that call for the delivery of $10,000 face value. Consequently, many dealers do not report sales of pre-1965 U.S. coins unless the sale totals $10,000 face value; others report $1,000 sales.
Sales of American Silver Eagles, privately-minted Silver Eagles, and 100-oz silver bars are not reportable, no matter the quantity.
Most investors have no first-hand knowledge of these matters; consequently, when precious metals dealers talk about cash reporting, 8300 forms, or 1099s, investors are unable to know that they may not be hearing the whole story. Wanting to avoid the government knowing about their precious metals investments, many investors are delighted to learn that their purchases will not be reported and end up buying overpriced coins.
As explained under “Reportable Purchases,” no precious metals purchases are reported unless cash reporting thresholds are exceeded. Investors wanting to avoid reportable sales should buy American Eagles.
The above discussions about cash reporting, IRS Form 8300, and bank reporting are for editorial purposes only and should not be relied on as definitive and final. Persons involved in cash transactions should consult their attorney or accountant.
Investors wanting to buy gold should go with coins such: American Gold Eagles, Maple Leafs, or Krugerrands. These coins move dollar for dollar with the world price of gold and are easy to buy, sell, and trade. Additionally, tracking the value of these coins is easy. No “expert” has to look at them.
One Response to “Gold Confiscation”
Leave a Reply
This is a good write regarding silver. I own silver bullion in addition to colloidal silver. I cannot live with out them. Happy I ran across your material.