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Think Before You Try to Spend Gold
March 29, 2012



The headline effort to recognize gold and silver coins as an alternative currency to the U.S. dollar has moved on to South Carolina.

An online AP report yesterday said South Carolina’s House Judiciary Committee passed a bill that would open the door to using gold and silver coins to make payments.

However, there is always a hitch in these bills.

Two are immediately apparent.

Individuals trying to use gold and silver coins to make payment can only do so if the business they are trying to pay agrees to it.

While we all know there are some restrictions on cash use, such as when some businesses refuse $100 bills, real money is not something that you have to negotiate every time you use it.

The South Carolina legislation also exempts the coins from state sales tax, but apparently does not exempt them from capital gains taxes, which is a tax that one pays when the value one receives from something exceeds the price paid.

As a consequence, individuals who find a business to deal with using gold and silver coins will find that they will trigger a tax event if they receive value that exceeds their cost.

A person spending a one-ounce gold American Eagle that he paid $1,300 for and then spends at a $1,650 value, would owe taxes on the $350 profit.

That is a paper work nightmare if you add this burden to daily financial record keeping.

As a symbolic gesture of disapproval of the actions of the Federal Reserve board of governors, the legislation has value. As a practical alternative to using the U.S. dollar, not so much.





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About the Author
David C. Harper has been a coin collector since 1963. He joined the Krause Publications editorial staff in 1978 and is currently editor of Numismatic News, Bank Note Reporter and World Coin News. He also edits two books annually, North American Coins & Prices and Coin Digest. He is the author of the Class of '63 column that runs each week in Numismatic News. His first bylined numismatic article appeared in the June 1971 issue of Coins Magazine and his various Krause Publications assignments included a stint as editor of the magazine 1980-1983. Harper received a bachelor of science degree from the University of Wisconsin-Oshkosh in 1977. He had a double major of journalism and economics.

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