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Dinar Taxes - Attorney Breaks It Down


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Mark,

Your post seems to hinge on the fact you paid fees or what not when getting your dinar from a dealer.... However what about us veterans that did not pay fees and exchanged dinar in Iraq/Kuwait and did not pay any fees it was an actual currency exchange without fees. That would make it a personal transaction and would put us into the Captail Gains category CORRECT?

Iraqi Vet05-07

Yes IraqiVet05-07. That is an excellent point. Not only those of you who did not have business (section 162) or investment (section 212) expenses because you just happened to be over there on your jobs, but also all of those people out there who have been given Dinar as GIFTS. This seems to be an exception to the section 988 ordinary income rule. I didn't mention it because I know that it could open up a can of worms.

Though it seems that you are right, I'm very cautious of assuming the IRS would not find a legal argument to fight that. I can even think of a couple of arguments for them. While I think your analysis is correct, anyone who thinks, "They wouldn't try that!" has never read the number of cases I have. If I were a "tax attorney" who had fought with the IRS in court, maybe I'd have a better feel for how it would go, but I'm not. I can only tell you that they come after big pots when they can. However, it is a sound premise based on sound legal theory.

Having a sound legal theory on which to base your actions should avoid any finding of fraud if the IRS ever disagrees with you. However, you could still end up paying the remainder of the tax plus interest.

In what I will call an "iffy" position like this, there are two ways to proceed. Either ask permission or ask forgiveness.

1) Ask permission - getting a written legal opinion from the IRS basically gives you there blessing (or cursing). It is called a Private Letter Ruling (PLR). Basically it is a formalized way to get an opinion from IRS legal counsel on how a particular set of facts would be treated under a specific set of laws. I don't do them, but I know plenty of people who do and they are expensive.

2) Ask forgiveness- when you have a reasonable belief that what you have done is correct (and I think that in your case it would be reasonable to attempt Capital Gains treatment) then you just have to wait and see if you are audited. You have three years for the IRS to contest what your return. If they disagree with you, you can fight them as little or as much as you want (which can be expensive). However, once you get past the three years, you should not have to worry unless they can justify a claim of fraud against you.

What I have seen some people do in "iffy" situations like this (if the don't want to get a PLR) is to do the return the way they think is correct, but also figure how much tax would be if they were wrong and the IRS came after them. They take the difference and place it in an account. If the IRS audits them and contests their stance on the tax return, they use the money they kept from the IRS in their fight against the IRS. However, if they get past the three years they pull the money out of the account and celebrate getting to keep it.

Let me remind readers that I feel this is risky and it ONLY applies to those who have not purchased their Dinar from Dealers, Banks, Etc.... Also, don't go saying that I gave you a legal opinion and relying on my credentials to try this. I didn't create an agreement with you, you didn't pay me to research and write an opinion, you can't use it as an opinion. (that is my simplified - plain English - disclaimer)

Anyway - very good point IraqiVet05-07

Also, God bless you for your service to our country

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AS I GATHER IF LESS THAN ONE YEAR ON INVESTMENT YOU PAY 35% IF MORE THAN A YEAR YOU PAY 15%, BROTHER I AM GLAD

I FALL ON THE 1 YEAR PLUS CATEGORY, THANKS

You are correct for Capital Gains treatment. The whole point of my topic is that it is probably not going to be Capital Gains Treatment. It will be Ordinary Income which is 35% today (federal) plus whatever your state income tax rate is. Let us not forget that President Obama is in the White House and the top bracket tax rates may go up for 2011.

Sickening isn't it?

Mark

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I have some questions?

One of my friends purchased the dinar I have from a dinar trading company. Wouldn't the tax he paid on the initial purchase cover any taxes? (Why pay taxes twice on the same currency once it RVs?)

I then paid him money for my share of the dinar. What tax does this fall under, and since it's been more than a year since I've done that, how can I prove that and what % would I pay (if any)? Would a reciept from him hold up as proof to the IRS?

Another scenario....I have since given away dinar as gifts to family members. Will I need to pay tax on that, or will the family members have to pay tax?

Thanks for any responses!

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I have some questions?

One of my friends purchased the dinar I have from a dinar trading company. Wouldn't the tax he paid on the initial purchase cover any taxes? (Why pay taxes twice on the same currency once it RVs?)

I then paid him money for my share of the dinar. What tax does this fall under, and since it's been more than a year since I've done that, how can I prove that and what % would I pay (if any)? Would a reciept from him hold up as proof to the IRS?

Another scenario....I have since given away dinar as gifts to family members. Will I need to pay tax on that, or will the family members have to pay tax?

Thanks for any responses!

When your friend purchased the Dinar, any tax paid was not a tax on gains. Simply put, it was like a sales tax. If you buy a house or a car, there are sales taxes. If you fix them up and sell them for more there is a gain (income reportable to the IRS). If the Dinar revalues, you should have huge gains (income) on which to pay taxes.

The question about the percentage you would pay applies to Capital Gains taxes. However, your Dinar will get Ordinary Income treatment - (35% right now federal plus whatever income tax rate your state has).

The question about your friends - there are two different taxes to be concerned with when giving Dinar. I think what you are asking about is income tax on the Dinar you have given. Any income tax will be paid by the person who gets the income. (In this case it will the person you gave it to.) Another tax to be concerned about with gifting Dinar that you may have heard of is the gift tax. Since you gave the Dinar Pre-RV you don't have to worry about it. However, if you want some more info. on the gift tax and strategies to consider, see my "Legal Considerations" topic to learn more. You can find it here:

Best of Blessings,

Mark

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Mark, If the Dinar does it’s RV thing, and all of the people in the US start to trade in the Dinar for the Dollar, couldn’t one argue that the Dinar is no longer a "nonfunctional currency” and be excepted as an Section 988 transaction?

It would still be a nonfunctional currency because it is not the currency that we function with in the US (any currency that is not US money). Even the Euro (which is regularly traded) is a "nonfunctional currency" because you can't go into a gas station and buy a candy bar with it.

I think that maybe what you are really asking is, "Would it be a 'regularly traded' currency that could qualify for section 1256 treatment?" The answer is that maybe it would become a regularly traded currency, but I doubt it. To be a regularly traded currency would take a bit longer. It would have to become something that people continued to buy and sell regularly (not just for this one event). Unfortunately, even if it did become a regularly traded currency, it would still not qualify for section 1256 treatment because you didn't invest in a contract (i.e. a futures contract), you invested in the actual, physical currency. I hope that answered your question. If not, feel free to give some more detail and I'll try again.

Best of Blessings,

Mark

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Mark...Just something to consider...Ali at Dinar Trade has mentioned that if you want to trade your Dinar in for gold you can do so and it would be considered a " bartered trade ", no 104 form filled out ( which means no ssn ) and after researching this you will pay no tax. When selling your gold most gold dealers charge 10% for the transaction...wouldn't it be better to pay 10% rather than up to 50% ??? As I mentioned earlier....Just something to consider...you can hear Ali saying this in an interview @ www.dont promote other sites.com, just click on the arrow in the middle of the page.

Edited by SFMS
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Hey Mark,

Me again. Great stuff! And thanks for spending so much time helping everyone work through this dilemma.

I realize that Section 988 and 1256 deal with forex and futures in situations where people don't take delivery of the currency.

But we all went out and purchased real cash dinar with the intent that it would increase in value. Why should this be treated any differently than buying Euros on forex and expecting them to increase?

Can't it be argued that, in reality, there is no difference between these 2 types of transactions and that dinar holders should be able to opt out for Section 1256 60/40 split?

You have to admit, like a lot of things with the IRS, it really doesn't make any sense.

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Mark...Just something to consider...Ali at Dinar Trade has mentioned that if you want to trade your Dinar in for gold you can do so and it would be considered a " bartered trade ", no 104 form filled out ( which means no ssn ) and after researching this you will pay no tax. When selling your gold most gold dealers charge 10% for the transaction...wouldn't it be better to pay 10% rather than up to 50% ??? As I mentioned earlier....Just something to consider...you can hear Ali saying this in an interview @ www.dont promote other sites.com, just click on the arrow in the middle of the page.

SFMS

Great post - I had not heard that. It would be really cool if it could work. There are a lot of strategies for avoiding having to pay the entire income tax. I think I'm going to try to compile some and start a topic so people can contribute more.

Hey Mark,

Me again. Great stuff! And thanks for spending so much time helping everyone work through this dilemma.

I realize that Section 988 and 1256 deal with forex and futures in situations where people don't take delivery of the currency.

But we all went out and purchased real cash dinar with the intent that it would increase in value. Why should this be treated any differently than buying Euros on forex and expecting them to increase?

Can't it be argued that, in reality, there is no difference between these 2 types of transactions and that dinar holders should be able to opt out for Section 1256 60/40 split?

You have to admit, like a lot of things with the IRS, it really doesn't make any sense.

I TOTALLY agree - it doesn't make any sense to me, but I'm sure someone somewhere got paid off pretty well for coming up with it.

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Mark, it was said by someone either in this thread or another thread about how we need to pay quarterly installments for taxes? Is that a necessity, or just a choice for people to pay it off little by little? Couldn't you just pay what you owe right in the beginning and get it all out of the way, or does Uncle Sam want as much as he can get for as long as he can get it?:angry:

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SFMS

Great post - I had not heard that. It would be really cool if it could work. There are a lot of strategies for avoiding having to pay the entire income tax. I think I'm going to try to compile some and start a topic so people can contribute more.

I TOTALLY agree - it doesn't make any sense to me, but I'm sure someone somewhere got paid off pretty well for coming up with it.

Mark...e-mail me your # so we can talk

Thanks

SFMS

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Mark, it was said by someone either in this thread or another thread about how we need to pay quarterly installments for taxes? Is that a necessity, or just a choice for people to pay it off little by little? Couldn't you just pay what you owe right in the beginning and get it all out of the way, or does Uncle Sam want as much as he can get for as long as he can get it?:angry:

You "could" pay it all at the beginning, but you don't necessarily want to. You could also pay quarterly estimates and then invest the part that you keep until you have to pay it. You should also look into some ways to mitigate the taxes. (That way you pay less overall.)

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You "could" pay it all at the beginning, but you don't necessarily want to. You could also pay quarterly estimates and then invest the part that you keep until you have to pay it. You should also look into some ways to mitigate the taxes. (That way you pay less overall.)

BAAAAAAAH........all this tax talk is making me nauseous :blink: , I'm just gonna ask my tax guy what the best way to do things is when I see him after this RVs. I've been with the guy for over 10 years. ;)

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IN CASE NO ONE KNOWS, IT IS REPORTED THAT THERE IS ALSO A 3% CAPITOL GAINS TAX INCLUDED IN THE NEW HEALTH CARE BILL....

It's 3.8% and is scheduled to begin in 2012. Hopefully we see the RV before then.

i gotta ask this may sound dumb....guess what i dont know and dont need ya bashin me just a simple question...what if its in a spendthrift trust?

Won't really make a difference on the nature of the tax. A spendthrift trust is just to protect the assets from the beneficiaries bad choices etc.... May say something like can not appoint to John, John's creditors, John's estate or the creditors of John's estate. That is the type of thing a spendthrift provision in a trust does.

Best of Blessings,

Mark

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Hi Mark,

I read somewhere here or on another Dinar website that Dinar Trade would take in the Dinar and pay out in Gold. Assuming that to be true, would that be a taxable event? If that is not a taxable event would trading in the gold for USD be a taxable event?

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Hi Mark,

I read somewhere here or on another Dinar website that Dinar Trade would take in the Dinar and pay out in Gold. Assuming that to be true, would that be a taxable event? If that is not a taxable event would trading in the gold for USD be a taxable event?

I am actually working on putting together a "topic" to answer this question. It is going to be unpopular with some folks so I want to have it well researched. Look for it in a couple of days.

Best of Blessings,

Mark

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