Gyroscopic Investing

What are the implications of 1 ounce Eagles having a $50 face value? I've heard some people state that because it's considered official currency legal tender, there is no collectibles tax imposed on the sale.

I know that because it's currency, IRS regulations allow Eagles to be used within IRA accounts, provided a custodian is holding them.

How about international foreign account disclosure? IRS requires a US Citizen holding an account over $10k overseas to report it. How about a safe deposit box holding under 200 Eagle coins? It's worth less than $10k according to the official currency face value.

Can I walk into a bank with the 1 ounce Eagle coin and get $50 in cash? I assume the clerk would be happy to hand me $100 out of her pocket in exchange for it. However, do banks and businesses have to accept them at their $50 face value, as legal tender? This would only be worthwhile if the price of gold dropped below $50 an ounce but it's curious to consider.

If a judge forces me to reveal my financial holdings, or if I report my net worth for the purposes of collecting government aid, can I reveal the gold coins as their value in legal tender, rather than gold content value?

Any interesting or curious traits that Eagles have due to their status as legal tender?

The Northwest Territorial Mint (of Canada) claims...

This nominal face value allows the coins to travel across national borders without the taxation or fees otherwise imposed by many countries on bullion itself.

Source: http://bullion.nwtmint.com/articles_faq.php

My understanding is that the US Mint can only produce legal tender. So, they stamp a nominal face value on the coins for symbolic purposes. "Legal Tender Bullion Coins" are not intended for public circulation even though technically are technically legal tender. These are also known as "non-circulating legal tender" in most countries. They are taxed as collectibles, and you can't evade the real value of the coins by claiming their face value is less than the real value of the coins.

The only time the face value comes into play is when the coins are exchanged as legal tender to pay debts. In all other situations the bullion value takes hold.

A coin dollar is worth no more for the purposes of tender in payment of an ordinary debt than a note dollar. The law has not made the note a standard of value any more than coin. It is true that in the market, as an article of merchandise, one is of greater value than the other; but as money, that is to say, as a medium of exchange, the law knows no difference between them.
Source: Thompson v. Butler, 95 U.S. 694 (1877)

These limitations are due to the fact that public law gives to such coinage a value which does not attach as a mere consequence of intrinsic value. Their quality as a legal tender is an attribute of law aside from their bullion value. They bear, therefore, the impress of sovereign power which fixes value and authorizes their use in exchange.
Source: Ling Su Fan v. United States, 218 U.S. 302 (1910)

TripleB wrote:Can I walk into a bank with the 1 ounce Eagle coin and get $50 in cash? I assume the clerk would be happy to hand me $100 out of her pocket in exchange for it. However, do banks and businesses have to accept them at their $50 face value, as legal tender? This would only be worthwhile if the price of gold dropped below $50 an ounce but it's curious to consider.

I'd think so...
§ 5103. Legal tender

United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues. Foreign gold or silver coins are not legal tender for debts.

§ 5112. Denominations, specifications, and design of coins

(h) The coins issued under this title shall be legal tender as provided in section 5103 of this title.

Gumby wrote:
The only time the face value comes into play is when the coins are exchanged as legal tender to pay debts. In all other situations the bullion value takes hold.

What if I held gold coins for several years until there was a huge capital collectible gain. However, I "owe" a debt to my LLC and repaid the LLC with gold coins using the face value. Perhaps the LLC loans me $10k in cash, at 18% annual interest. I repay the debt in a few days with gold coins instead of cash.

Then the LLC sells the gold coins at zero collectible tax gain. Could that work?

TripleB wrote:

Gumby wrote:
The only time the face value comes into play is when the coins are exchanged as legal tender to pay debts. In all other situations the bullion value takes hold.

What if I held gold coins for several years until there was a huge capital collectible gain. However, I "owe" a debt to my LLC and repaid the LLC with gold coins using the face value. Perhaps the LLC loans me $10k in cash, at 18% annual interest. I repay the debt in a few days with gold coins instead of cash.

Then the LLC sells the gold coins at zero collectible tax gain. Could that work?

I doubt it.

That sounds like a prohibited "step transaction".

One implication is that Eagles have a price floor of $50/oz.

KevinW wrote: One implication is that Eagles have a price floor of $50/oz.

That would mean something only if $50 worth of USD had a purchase power "floor" that it was guaranteed to purchase a minimum amount of food/gas/etc