Captial gains tax?

[palung]

Consider this:

The RV takes place, but the person has only had his dinar for two months.

He takes the dinar to the bank and arranges a loan based upon the value of the dinar and using the dinar as collateral. Arrange to balloon the note at 1 year and a day after the purchase of the dinar. At one year and a day you cash in the dinar, payoff the note, and pay the tax.

1. You get the use of the money you needed.

2. You get to deduct the interest paid to the bank.

3. You paid only 10% tax on the capital gains rather than 35%, thus saving 20% of your cash in amount.

If you cash in the full 1 million at the RV (for simplicity $1 to 1D) you will pay $350,000 in taxes.

If you arrange a loan at the bank for 366 days from the time you purchased the dinar, you would save $200.000.

No one should ever consider not paying the tax, but you can plan to reduce the amount!

I have no training in taxes, tax law, or finance. So take what I write here as a possible solution, but check with you tax advisor.

Comments?

...........and of course let's all hope they don't put 90 days mandatory cash in or some sort.

[FlintNPebbles]

Thanks zorbyx1. I have understood that it is taxable income and not capital gains for some time but wasn't really able to express it to my husband when he questioned why....so now he can read your response. He purchased the currency while in Kuwait years ago and we do not have a receipt for proof of purchase for capital gains anyway! There are ways to legally limit your tax liability but a good tax attorney and CPA would need to know your entire financial situation in order to help with that planning.

[ididitfirst]

hi zorb, if everyone is saying long term capital gains is 15% and short term is 30%, you say it will be regular income tax, could you please give me an idea of the percentage i would pay? i truly know nothing about taxes except that i have to pay it. I'm thinking cashing in that money would put me in a higher tax bracket which would mean more than 30% so that dear old uncle would get more from me under regular income than under capital gains. help my thought process please.

[littlefeet]

THX Zorbyx1, very good read !!! Like most, I have heard all the ways to get around paying taxes or as little as possible. I would like to spend my money as I wish without wondering when tax man is coming to take it away. This has been the biggest 'talk' subject between those I know who own dinar. Once again, thank you !

[ididitfirst]

zorb, thanks.it does help. bottom line, whichever way i will be taxed our uncle will get quite a bit. for people who aren't thinking of ways to decrease their tax liability, they might end up in shock when they see their tax bill. anyway thanks for your answer and i can't wait to have such a tax problem.

[Buckeye Pilot]

agree that the tax on the IQD will be taxed at ORDINARY INCOME RATES!

Wrong!

You should know what your talking about before you make an Asz out of yourself. It cant and wont be taxed as ORDINARY INCOME. This is CURRENCY SPECULATION and taxed as such, (Capital Gains) There is NOTHING even remotely close to the two> NONE.

[Rabbi]

AVOIDING tax is perfectly legal and our right as a taxpayer. On the other hand, EVADING taxes is illegal. You can't avoid paying capital gains tax, but you can avoid paying tax at the short-term rate (currently taxed up to 35%, like your other income). Instead, arrange for a loan, using the value of the RVed dinar as security for the loan. Then once you have held your dinar for more than 12 months, you can can cash them in, pay your capital gains tax at the long-term rate (currently at 15%), and pay the loan off.

Of course, you will need to stay aware about any proposed changes to the tax rates to long-term capital gains that may be in the offing. Any new tax legislation usually comes with an effective date that is known before the bill is passed. Your tax accountant should be able to keep you abreast of any new developments in the tax code

[paperboy]

BuckeyePilot - what are your credentials to make such a claim against zorbyx? We know zorbyx & his credentials and his posts are verifiable. Can you tell us the same about yourself?

[Buckeye Pilot]

Well, well we will see what happens! But I will put my faith in TWO tax attorneys and a CPA EA. You should go read section 988 of the IRS tax code.

As for currency speculation, go read section 1256 of the IRS tax code and see if it applies. I would love to have this as capital gains, all of mine would be 15%! But I suggest you plan for the worst case and hope for the best.

As for me making an ass out of myself, time will tell, glad you are so confident about the tax laws. Maybe you should take what was written to your CPA or tax attorney.

Zorbyx

Not a Problem.....

Show me where EO 13303? states anything other than a "Privatization Of Ownership " Iraqi Dinar? This is where ALL of the Tax Guru,s are being mis-lead. Far too many of the tax codes written have NEVER been faced with RV Of a ":Presidential Order Authorizing ownership (In this case Supercedess) Section 1256 Of the IRS Code. I will bet you 100,00 Dinar after the RV, This WILL be taxed as Capital Gains Depending on the length of ownership.

You In ?

988?....... How would or could this apply based on a Title 9, Who are you going to attach a Medicare/SS/Fedaeral ID# Too? Thin Air/?

I will be clear, This is NOT my Knowledge. My Mother was a GS 20 For the Chicago Mid-West IRS division from 1977-2007, I put my faith in her 30 years of trudging thru the pits of the IRSt

Your IQD profit will be added to your earned income and taxed as such. If you make a profit over $375,000 it will be taxed at 31 to 35%.

This statement is just Nuts, How would The IRS know what your profit is? You could say you paid any amount you wish.......... It just wont work that way. I would have you asked your Tax guys why this such a Slam dunk for Ordinary Income? They may want to dig a little deeper.

I apologize for the asz comment, It was not as intended.

Barry

[Tom 777]

I have a question for all of you to think about and give some feedback.

Here is a possible situation for a new investor: This individual has just purchased 1million dinar. This person is not a VIP, does not want to start a business off shore, yet needs to have about $250,000 from the investment as soon as there is an RV.

If they cash in immediately they will pay capital gains tax of about 35%, but they need the money.

What does this person do to get the cash and yet avoid paying the capital gains tax?

As soon as yyou cash in you will be responsible for the taxes on your investment, but you can do as you like but remember that you will also end up getting caught sooner or later. Best bet is pay the taxes as required and you woun't have to be looking over your shoulder.

[Jack Dinauer]

I have a question for all of you to think about and give some feedback.

Here is a possible situation for a new investor: This individual has just purchased 1million dinar. This person is not a VIP, does not want to start a business off shore, yet needs to have about $250,000 from the investment as soon as there is an RV.

If they cash in immediately they will pay capital gains tax of about 35%, but they need the money.

What does this person do to get the cash and yet avoid paying the capital gains tax?

I say don't worry, by the time we cash in it will be long term capital gain.

[akahornet]

who cares? really? counting your eggs before they hatch. i don't even know why people ask question such as this. i mean for curiosity sake yeah but we don't know if it will ever rv so the argument is moot

Go no RV!

[proteus]

I think the other option is kinda better if it is possible...

Find your favorite bank,

put your dinars in a collateral holding safety deposit box,

make a contract with the bank for a loan using the dinar NEW VALUE to hold securely against the loan,

and simply keep the dinar in the safety deposit box until your investment reaches the "LONG TERM" Status,

then, cash out the DINAR, PAY OFF THE LOAN, and live happily ever after...

in the meantime, the interest you will pay on the loan will easily be less than the taxes,

that you would, and that would have paid on immediate cash-out and capital gains!

Edited July 5, 2011 by proteus

[Rhorse]

hmmmm lets see ..... pay the tax and be happy with whats left ,let me elaborate , i have a friend whos mother died and left a $100000 life insurance policy ,well the thought of having to pay 43%tax didnt sit well with this person so she hires a lawyer to figure a way out of paying the tax ,well to cut the story short after paying the lawyer $9000 to try and not pay taxes well she ended up having to pay the tax after all oh and by the time she paid the tax she had to pay penalty and interest plus the lawyers fee Moral of he story pay your tax and gp about your NEW business and be happier !

Um... I thought life insurance proceeds were not taxed at all?... I'm pretty sure.

[txwWrestling]

Well I have tired to contact the IRS and question about this and was transferred about 3 times finally to St. Louis where I spoke with a IRS agent over foreign currency. I asked the question #1 is it considered a cap gain or if its considered ordinary income. I was told no one at the IRS can advise on foreign currency gain. She read that line a few times. Then was told to seek a professional tax attorney or CPA. I work at CPA office and have called 5 others to get different answers. When I mentioned that to her she said she could not help. Really..if the IRS can't answer the question thats pretty bad. How are professional suppose to get answers? She told me to do internet research. lol I wish I would have gotten her ID badge number.

[davenfl]

capital gains is simple. 1 year and 1 day it's 15%. there is no 35% cap gain rate. if its short term then it is in whatever bracket you are in. although the top rate is 35% it is tiered up so not a straight 35%. of course if all the guru doodoo is right and we all make millions AND it is all short term then and only then would it be 35%. not because of the cap gain rate of 35% but because that is the top rate.

[Buckeye Pilot]

Sorry Barry,

The term profit was a mistake by me, it should have said earnings (typing and thinking too fast), since it would be reported as ordinary income for tax purposes.

Let us just agree to disagree without being disagreeable!

Sincerely,

Bob

I will be Happy if the Damn thing just gets to the point we will............ Really HAVE to hash this out one way or the other Sir Bob!

Barry

[txwWrestling]

Found this from another site..Going to do some research on this. The tax rate on ordinary income is MUCH higher then Cap gain on a schedule D...I sure hope this information is false.

Second, if they can understand these publications then they need to start reading up on this. Publication 550, page 40, paragraph titled “Foreign Currency Contract” is the place to start. I have been informed by the IRS that this will not be Capital Gains and will not be taxed as such. Anyone reporting this on Schedule D with their annual tax return will have a 99.9% chance of being audited. *scary thought to some*

This exchange will be treated as ‘ordinary income’ for tax purposes as it is a direct exchange from one currency to another. IRS agent stated “it is not a capital gain as would be with stocks or other investments as currency exchanges have never been taxed as an investment but instead as ordinary income.”