Possible taxation answer

[easeandpeace]

ExecConsult,

I am so amazed that this is the case( as you suggested) and that little newbie me had the foresight to take your advice!! So I get to get the full revaulation of the currency (obviously paying the spread) and as long as i do not take out the money and continue to invest it then this is a tax free situation? I then get tax advice about when I can extract funds from the account at a certain age without paying tax...have I understood you? An amazed easeandpeace

[MAYDAY]

THANKS TO ALL FOR INVALUABLE UPDATES!! THIS IS SUCH AN EXCITING TIME.......PLEASE SEE MY PREVIOUS POSTS for additional COMPELLING REASONS to use an "NON INTEREST BEARING TRANSACTION ACCOUNT" because of UNLIMITED FDIC COVERAGE ON SUCH ACCOUNTS THROUGH 12/31/2012!!

GOD BLESS YOU AND HOLD YOU IN THE PALM OF HIS HAND!

[Biker]

My Tax /Accountant that teaches taxes to others said, it would be treated as investment, capitol gains. Long term one yr and after 15%, short term less than 1 yr 35%. End of story. And the feds already no you got it, they were notified when you bought it . If it was a gift then who ever bought it is liable for the tax unless you pay them for the amount they gave you. I no we all feel that the state and the feds don't deserve any of it but you will still be thinking that when your sitting in the Fed Pin lol. Oh and in the state of Maryland we have to pay 8% to the state.

[easeandpeace]

Biker,

I think there is a different tax implication if it was bought under your Roth IRA. ExecConsult can you weigh in on this?

[Captjohn]

I just filed my taxes and my tax rep said it would be a schedual D(capital gains). He even called the IRS while I was sitting right there and also called his tax att, and they both said the same thing. I know everyong is saying other income at 35% but he said that this is an investment and would be treadted that way on taxes, 35% short term and 15% long term. He and his tax att. said that unless the IRS comes out with a set directive that it would be counted as capital gains.

I consulted with my CPA who said the same thing: would be considered as an investment and taxed as long or short term capital gains. As far as the IRS coming out with a specific directive pertaining to dinar exchanges, IMO that would be singling out a specific group for unique tax treatment which I do not believe they can do without the approval of congress.

[ExecConsult]

I have just come back and read the following:

My Tax /Accountant that teaches taxes to others said, it would be treated as investment, capitol gains. Long term one yr and after 15%, short term less than 1 yr 35%. End of story. And the feds already no you got it, they were notified when you bought it . If it was a gift then who ever bought it is liable for the tax unless you pay them for the amount they gave you. I no we all feel that the state and the feds don't deserve any of it but you will still be thinking that when your sitting in the Fed Pin lol. Oh and in the state of Maryland we have to pay 8% to the state.

I consulted with my CPA who said the same thing: would be considered as an investment and taxed as long or short term capital gains. As far as the IRS coming out with a specific directive pertaining to dinar exchanges, IMO that would be singling out a specific group for unique tax treatment which I do not believe they can do without the approval of congress.

This is of course exactly what I would expect any CPA or tax attorney to say initially. In fact, it is the exact same thing I said when someone first approached me with it. What you have to understand is that EVERY tax professional is trained to think, "APPRECIATED ASSET = CAPITAL GAINS TREATMENT." We know it to be an absolute fact. It is just like you know "'I' before 'E' when spelling.

Let me ask both of you a question. Biker and Captjohn - Did you pay your CPA to research the issue and draft an opinion letter for you or did they just have an answer ready for you as they have been trained - "Appreciated Asset = Capital Gains." My guess is that they had a quick and ready answer and never dug into anything much. Am I correct? Well that is why they are wrong. If you actually paid them for a researched opinion letter you would find the results are not so certain.

All of us know the spelling rule I mentioned above, "I before E." Whenever you spell something with an "I" and an "E" the rule is "I before E." That works perfectly for "wield," "field," and "shield." If someone were to ask you, "does the "I" come first in a word or does the "E" come first?" you would immediately think, "I before E."

I know there are some of you out there that are screaming to yourselves about what a moron I am. You are saying, "That's not all there is. There is a second half to the rule." Well, what if the second half of the rule was never taught? Everyone would think the first half was all there was and would never question it when asked how to spell "nieghbor" and "wiegh." the "I" would go first. Of course this is wrong. The rule goes on to say, "I before E except after C or sounding like A as in neighbor and weigh."

The "appreciated asset" rule is the same. All appreciated assets are treated as ordinary income UNLESS they are currency, currency contracts, or inventories. The problem is that the professional community generally does not know about the last part of the rule. Then - when asked to look deeper, they find publication 525 pg. 33 (or even better yet the law - section 988 (e )(2 )) and stop there because it says "for a personal transaction it is ordinary income." However, this lack of thoroughness leads to an improper conclusion. The parts being missed are key and vital to the analysis. No cursory examination of the code will unravel the mysteries here. You have to really dig in. If you stop at 988 (e )(2 ) or before, you will always come to the conclusion that any revaluation should be treated as capital gains. However, all you have to do is read the next subsection (988 (e )(3 )) to discount this hasty conclusion. That is where the conclusion is called into question and you have to start digging. Anyone researching this for a full opinion would have to go into the regulations and the legislative history to develop that opinion. This type of research makes it clear that the whole intent of the law is that if there is a transaction that has business or investment nature it is to be taxed as ORDINARY INCOME. If you need, I can post more about this analysis. For now I'd send a letter or make a phone call to your CPA and ask if they disagree with the assessment that they did not research their answers and to rely upon their opinion you would have to pay them and have them research before giving the opinion.

It boils down to the fact that foreign currency is under completely different rules (section 988).

Hope that is helpful,

Best of Blessings,

Mark

My Tax /Accountant that teaches taxes to others said, it would be treated as investment, capitol gains. Long term one yr and after 15%, short term less than 1 yr 35%. End of story. And the feds already no you got it, they were notified when you bought it . If it was a gift then who ever bought it is liable for the tax unless you pay them for the amount they gave you. I no we all feel that the state and the feds don't deserve any of it but you will still be thinking that when your sitting in the Fed Pin lol. Oh and in the state of Maryland we have to pay 8% to the state.

OOps - one more thing :

if it is a gift - the person who gave it will NOT be liable for the income taxes. The way it works is that when you give the gift, the person who receives it also takes your basis (how much you paid for it) and your holding period. If they sell it and realize an income over the amount of the basis they will have income and will have to pay taxes on the amount of that income.

I'm sure that your CPA would agree wit that as well.

Best of Blessings,

Mark

ExecConsult,

I am so amazed that this is the case( as you suggested) and that little newbie me had the foresight to take your advice!! So I get to get the full revaulation of the currency (obviously paying the spread) and as long as i do not take out the money and continue to invest it then this is a tax free situation? I then get tax advice about when I can extract funds from the account at a certain age without paying tax...have I understood you? An amazed easeandpeace

You have understood correctly. Cool Huh?

Best of Blessings,

Mark

[easeandpeace]

ExecConsult,

Cool!!! Hot tamales!! Cat's pajamas!!! Twirling about my room, and globe trotting visions of sugar plum freedoms dancing in my head!!!

[few24u]

ExecConsult - Thanks for you knowledge and work. You should be hired as a consultant for DV's so that you can be of further assistance to everyone in this family! Many blessings to you my friend (i before e)!

[ExecConsult]

Thanks for your kind words.

I was going through this post this morning because I thought it worthy of adding to my dinar tax blog and I realized I had typed something wrong that needs to be corrected. Above I said:

Then - when asked to look deeper, they find publication 525 pg. 33 (or even better yet the law - section 988 (e )(2 )) and stop there because it says "for a personal transaction it is ordinary income.

That makes absolutely no sense with the point I was trying to make about how CPAs and attorneys get it wrong - that is because that is NOT what the law says at all. it should have read:

Then - when asked to look deeper, they find publication 525 pg. 33 (or even better yet the law - section 988 (e )(2 )) and stop there because it says " for a personal transaction it is CAPITAL GAINS.

REMEMBER: this is why they get it WRONG. the law goes on to indicate that the capital gains exception in (e )(2 ) does not apply to us as investors.

I am only making this point to correct my typo.

Best of Blessings,

Masrk

[Biker]

Thanks EXEC CONSULT i will definitely bring this to his attention. I definitely want to get this right if this ever pans out.

[proverbs]

[Greetings and blessings ExecConsult,

I've been considering doing the Selfdirected ROTH IRA and purchasing the dinars that way. Are you aware of any reliable companys that will purchase dinars with the self directed ROTHs that they offer??

Others on DV have suggested ENTRUST administrative services. Would you agree with this? I want to diversify by doing the IBC as well as other options. THe ROTH seems like a good way to go IF we can get the

dinars into the ROTH IRA. Any thoughts on this would be appreciated. Thanks

Proverbs

mike

[ExecConsult]

Greetings and blessings ExecConsult,

I've been considering doing the Selfdirected ROTH IRA and purchasing the dinars that way. Are you aware of any reliable companys that will purchase dinars with the self directed ROTHs that they offer??

Others on DV have suggested ENTRUST administrative services. Would you agree with this? I want to diversify by doing the IBC as well as other options. THe ROTH seems like a good way to go IF we can get the

dinars into the ROTH IRA. Any thoughts on this would be appreciated. Thanks

Proverbs

mike

There are several IRA companies that would be willing to purchase dinar for a self directed IRA. Entrust used to have a relationship with DinarTrade and got a lot of recognition that way.

Earlier on, when I was looking into this technique I did a post which can be found here:

In that post I listed the following companies to use:

Summit Trust (www.summittrust.com)

Pensco Trust (www.penscotrust.com)

Equity Trust Company (www.trustetc.com)

Entrust IRA Services Inc.

201 Wilshire Blvd.

Santa Monica CA 90401

(310) 899-3811

www.theentrustgroup.com

However, since that time I have been recommending another IRA Custodian, NAFEP.com. I have sent several people to them and when I have received feedback it has all been positive. NAFEP was set up as an IRA company to hold hard assets like gold and silver. They are willing to purchase dinar and will hold the dinar in their gold vaults.

Hope that is helpful.

Best of Blessings,

Mark

[matthew6:19-21]

There are several IRA companies that would be willing to purchase dinar for a self directed IRA. Entrust used to have a relationship with DinarTrade and got a lot of recognition that way.

Earlier on, when I was looking into this technique I did a post which can be found here:

In that post I listed the following companies to use:

Summit Trust (www.summittrust.com)

Pensco Trust (www.penscotrust.com)

Equity Trust Company (www.trustetc.com)

Entrust IRA Services Inc.

201 Wilshire Blvd.

Santa Monica CA 90401

(310) 899-3811

www.theentrustgroup.com

However, since that time I have been recommending another IRA Custodian, NAFEP.com. I have sent several people to them and when I have received feedback it has all been positive. NAFEP was set up as an IRA company to hold hard assets like gold and silver. They are willing to purchase dinar and will hold the dinar in their gold vaults.

Hope that is helpful.

Best of Blessings,

Mark

Very helpful THANK YOU.

[DEESEAN]

Mark, thank you for your selflessness and insite. you have answered many questions that have been in the back of my mind since i first invested back in 04. I don't care what they say about lawyers, you ROCK sir.

[Saint]

ExecConsult. Whenever I see on other forums and in other topics questions about capital gains vs regular income I usually refer them back to this site and specifically to your comments for them to read. I always tell them to take from it what they will. My question to you is....Is that ok for me to do. Thanks Mark

[ExecConsult]

Saint -

Not only is it okay, but I am pleased that you do so. There is so much incorrect information floating around and I really want as many people as possible to have correct information. In fact I even started a blog for the same purpose. You are more than welcome to recommend people to read what I have written on this site.

Best of Blessings,

Mark

[DEESEAN]

Exconsult, i was wondering since i'm in the Military and in a tax free Zone if the RV happens and i cash in during a month that i am still under this status will any of the mentioned rules change due to my tax free status?

Thanks in advance for your time.

[ExecConsult]

Exconsult, i was wondering since i'm in the Military and in a tax free Zone if the RV happens and i cash in during a month that i am still under this status will any of the mentioned rules change due to my tax free status?

Thanks in advance for your time.

Unfortunately it does not change any of the rules for you (except that you might be able to delay filing your return). The "Tax Free" part is only for "military pay." It would not apply to any other sources of income.

For more information please look at the IRS Publication 3: http://www.irs.gov/formspubs/article/0,,id=242858,00.html (This will not automatically turn into the correct link. You must copy and past in your browser.)

Hope that is helpful.

Best of Blessings,

Mark

Edited February 27, 2012 by ExecConsult

[DEESEAN]

Thanks again Mark.

[blkman1999]

I have a Roth IRA and I was told I could not buy dinars thru my Roth. they said they haven't heard of buying thru Roth.

[DEESEAN]

Ok so here is a question for anybody in the know, since this will be concidered regular income does that mean we don't have to worry about the 3.6% Obama Care tax?

[ExecConsult]

I have a Roth IRA and I was told I could not buy dinars thru my Roth. they said they haven't heard of buying thru Roth.

There are many IRA custodians that will not buy particular assets through their IRAs. That is why I provided the list in the following post.

My recommendation would be to use NAFEP.

Best of Blessings,

Mark

[ExecConsult]

Ok so here is a question for anybody in the know, since this will be concidered regular income does that mean we don't have to worry about the 3.6% Obama Care tax?

Though I have not read the law myself, my understanding is that this tax is to be applied to all "unearned income" for people who earn $200,000 or more ($250,000 if married filing jointly). That would include most (if not all) dinar holders. Unearned Income may also be simply defined as investment income. Gains on exchange rates of foreign currency will most definitely be considered "unearned income."

Let us hope that we get people in government who can kill this thing.

Best of Blessings,

Mark