By Patrick A. Heller
Commentary on Precious Metals Prepared for CoinWeek.com
If you invest in paper assets like stocks, bonds, CDs, and currencies and earn income or a profit from them, the Internal Revenue Service wants a cut for the federal government. Many states and municipalities also want a piece of the proceeds.
It doesn’t matter if you purchased a share of stock for $20 in 1962 and sell it this year for $70, which means that you actually suffered a financial loss after factoring in the decline in the value of the US dollar during the time you held this stock. If, on paper, the current selling price in US dollars exceeds your dollar cost basis five decades earlier, the governments want to share in your “bounty.”
This taxation of “phantom gains” resulting solely from the continuing decline in the value of the US dollar isn’t right. It’s just plain common sense that it isn’t fair. The taxpayers weren’t the ones responsible for the falling value of the US dollar.
This extra tax burden is a significant obstacle for anyone trying to invest so as to stay flat despite the falling value of the dollar. If you purchase gold, silver, other commodities, or any paper assets that happen to “appreciate” in US dollars by an amount equal to the drop in the currency, the taxes will prevent you from breaking even.
However, there is a way to enjoy tax-free benefits by owning certain tangible assets. The secret is to acquire consumable goods—then consume them!
Last week, I opened a can of corn to cook for dinner. I had purchased it on sale a couple years ago for 30 cents. At the time my family enjoyed this food, the largest grocery store chain in my area was advertising a loss-leader sale price of 79 cents for the same product!
I know, I know, the US Department of Labor is claiming that the Consumer Price Index over the past two years is only rising 2-3 percent per year. Well, maybe those government statistical reports could be recycled as toilet paper, because you and I live in the real world and have to buy goods at real world prices.
Even though my family ate that can of corn, I’m not going to have to put that 49 cents of “paper profit” on my tax return and give a cut to government. I won’t have to do that on the extra supply of socks I bought, on the television I view, on the lawn mower I purchased, or even on the extra toothbrushes and school supplies I picked up at bulk sale prices.
The US government is committed to the continuing depreciation of the US dollar. Every time you hear the term “quantitative easing,” that is exactly what I am talking about. As such, stocking up on non-perishable consumer goods as they are offered at sale prices now could generate a surprising amount of tax-free “profits” in years to come. Be creative and have fun applying this idea to your own circumstances. It’s not such a corny idea.
Patrick A. Heller owns Liberty Coin Service and Premier Coins & Collectibles in Lansing, Michigan and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed athttp://www.libertycoinservice.com. Other commentaries are available at Numismaster (http://www.numismaster.com under “News & Articles). His award-winning radio show “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 AM Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at http://www.1320wils.com.