Bad News For The Fed and IRS

Yippe-Ki-Ya · Aug 8, 2011

This month, Utah became the first state in the country to legalize gold and silver coins as currency.

So what does this mean to you, me, the Fed, IRS, and the world? To understand the significance of Utah's actions, you need to understand the definition of the word "currency."

As strange as it may seem, governments determine what they think money is. For most of us, money or currency is the paper in our wallets. It only has value because governments have the power to declare paper to be money.

In 1933, President Franklin Roosevelt made owning gold illegal. The president declared that money now was paper. The key to this scheme working, is the government only accepts its own "paper" as money. You cannot pay your taxes with gold or silveronly official government paper.

To make sure we only used "paper" the government imposed a very high capital gains tax of 28% on gold and silver. That means, if you bought gold or silver for let's say $10 and it increased in value by $10, the government would tax you $2.80 for your gains, even if you held the gold or silver for several years.

A 28% tax is nearly 100% higher than long-term capital gains tax of 15% in the US. For example, if I bought a stock for $10, held it for a year, and sold it for $20, my tax would be $1.50 on my gains.

One reason why I like real estate, better than paper assets or gold and silver, is I can be taxed 0% on my gains. In fact, if I use the tax laws correctly, I receive money back from the government. In other words, rather than be taxed for $10 gains, I often receive additional money, a payment from the government rewarding me for making money. For example, not only do I receive my $10 gain, I receive an additional $2 from the government for doing what the government wants me to do.

Please read my latest book Unfair Advantage The Power of Financial Education to better understand how entrepreneurs and real estate investors use the tax law to receive payments from the government. In this book, my tax accountant and Rich Dad Advisor, Tom Wheelwright does a better job of explaining this tax strategy.

He explains that real estate is one of the few investments where not only can you legally escape tax on your gains and your cash flow (rents), you can actually receive tax deductions against your other taxable income. So if you have $10 of cash flow from your rental property, the IRS actually gives you a special deduction, called depreciation, that could produce a tax benefit of $2 or more so your total cash flow is $12.

Summarizing the trade, the gold and silver investors pay $2.80 in tax for a $10 gain, netting $7.20. Long-term stock investors pay $1.50, 15% in tax for a $10 gain netting $8.50. And real estate investors might pay $0 for a $10 gain. Then they may receive a $2.00 bonus from the government for doing what the government wants done, netting $12 for a $10 gain. This is why I love the business of real estate.

Oil has similar returns as real estate, but not as good as real estate. When I invest in oil, I receive a 28% tax break from day one. That means, I pay 28% less in taxes. Lets say I invest $10,000 in an oil well. If my tax bill for the year is $10,000, I receive a $2,800 tax break and pay only $7,200 because I invested in oil. When the oil comes in and I start to sell and earn $100 income, the government allows me to pay tax on only $85.00, a 15% tax break, of the $100 income. In other words, they discount my income, before taxing it.

You can see that I receive two tax breaks. I receive one tax break for investing in oil production and I receive a tax break when we get paid for our production.

Workers in the E and S quadrant are taxed on 100% of their income. No discounts. This is why lesson #1 in Rich Dad Poor Dad is "The Rich Don't Work For Money." The rich do not invest in 401ks filled with mutual funds either. Why? No tax breaksbut that is another story.

BACK TO GOLD AND SILVER
The reason Utah's actions are significant is because Utah is taking on the Federal Reserve Bank, IRS, and Washington, D.C.

The Utah state government is bypassing the Fed and the Treasury by accepting gold and silver as money, for example, allowing taxpayers to pay their taxes in gold and silver.

Let me explain further. Let's say I bought gold in the year 2000 for $300 an ounce. In 2011, with gold at $1500 an ounce, if gold is now treated as money instead of being treated as an investment, I do not have to pay that 28% capital gains tax to the US Treasury.

In this example, of $300 per ounce to $1500 per ounce, a gain of $1200, I do not need to pay 28% of $1200, or $336 per ounce, in taxes to the US Treasury. On 1000 ounces, using the same buy and sell numbers, that is a savings of $336,000 in taxes, or $336,000 staying in my pocket for me to use. Thank you Utah. Tom Wheelwright adds that the change by Utah does not mean that gold will now be treated as money by the Federal government. It should mean that Utah will not tax it when used as money. It will be years before the courts decide whether this change means a change in how gold and silver are taxed.

Not only does this challenge the Fed, IRS, and the US government, it makes gold and silver more valuable. Using gold and silver as money, rather than a taxable investment like stocks, bonds, and real estate, makes gold and silver more desirable, at least in Utah.

One reason there is such a high tax, 28% on gold and silver is simply because the Fed and the tax department do not want us to hold gold and silver. By holding gold and silver, we pull their phony dollars out circulation and mock their corrupt system of counterfeit money.

Utah is truly a story of David taking on Goliath. Minnesota followed Utah later this month, taking a step closer to make gold and silver legal money. North Carolina, Idaho, and at least nine other states have similar bills being drafted. A Republican lawmaker has introduced a bill in Congress to explore the option for the entire US.

If the 28% tax on gold and silver is repealed, you may see a massive rush to own more gold and silver. Repealing the 28% tax is like a 28% increase in value. More importantly, it means 28% more money for those who have been following COR.

In many ways, history is only repeating itself. After all, gold and silver, especially silver, has been real money for thousands of years.

Thank you for supporting COR.

Robert Kiyosaki

PS: I thank the people and state of Utah for taking the first step to dismantle the conspiracy of the rich. This is big.
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Smoothcriminal · Aug 8, 2011

Thanks for posting - was a good read.

I know the real estate bit must have annoyed you no end.

Yippe-Ki-Ya · Aug 8, 2011

Smoothcriminal said:

Thanks for posting - was a good read.

I know the real estate bit must have annoyed you no end.
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lol - not really ... there are many tax breaks in the US which do not exist here in Australia, eg deferring CGT if putting proceeds into a new property, as well as interest on mortgage for owner occupier being deductable.

so yeh - especially since the market has already corrected considerably in the US - its altogether another kettle of fish over there compared to buying property here.
if i was in the US i'd be seriously considering buying property about now

Sargeant Argent · Aug 8, 2011

If gold and silver becomes readily accepted tax free currency for the masses the price increases will be parabolic!

Sargeant Argent · Aug 8, 2011

If gold and silver becomes readily accepted tax free currency for the masses the price increases will be parabolic!

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