Bad News For The Fed and IRS

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 silver…only 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 breaks…but 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.

Original Source – Conspiracy of the Rich

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Buy or Sell Gold?

The latest Wall Street Journal is filled with stories about financial planners advising clients to either sell their gold or not buy anymore.

Naturally, you’re probably asking, “Should I buy or sell gold?”

My answer is that it depends.

My gold buying career began in 1972 while I was a pilot in Vietnam, when gold was about $85 an ounce. When it passed $750 an ounce from 1979 to 1980, I was forced to sell, not because I wanted to, but because I needed to pay off some bills.

In the 1980’s, when Kim and I were flat broke, we bought a little gold and a little silver on a regular basis. When gold dropped below $400 on its way down from $850, I bought gold at $400, thinking it was a good price. Then it dropped to $375. I felt stupid, saying to myself, “I should have waited.” So, I bought at $375 and it dropped again. Still feeling stupid, I bought more gold. When gold went below $300 around the year 2000, I bought as much as I could afford.

In 1996, with gold and silver so low in price, a group of investors and me purchased a silver mine in South America and a gold mine in China. We nearly went broke bringing both mines to market in Canada. The silver mine was sold to another silver company and the Chinese gold mind went public through an IPO on the Canadian Exchange.

I regret selling that silver mine. I should’ve held on to it but the cash was tight and the offer too good to refuse.

In 2000, Rich Dad Poor Dad was still a self-published, obscure book. We had no income from the book or our games. Oprah hadn’t called yet to get me on her program. Our primary investments at the time were larger apartment houses and one commercial property. Cash was tight in 2000, but with gold and silver at such low prices, we cut corners on food and luxuries and bought as many gold and silver coins we could afford.

In 2001, after Rich Dad Poor Dad took off, Ron Insana interviewed me on the financial TV channel, CNBC. He asked me what I was investing in and I told him gold. He thought gold was a strange investment but listened to my arguments politely.

Generally, paper asset investors like Ron Insana, don’t invest in gold, silver, or real estate. If they do invest in hard assets, they invest via paper assets through gold mining shares, ETFs (Exchange Traded Funds), and REITs (Real Estate Investment Trusts).

Today, gold is on everyone’s mind. Many say gold is in a bubble. Some say it’s time to sell, not to buy. Personally, I’m not buying much more gold and silver because I have enough. But you might want to know why I’m not selling.

Why I’m not selling
The primary reason I’m not selling my gold and silver is that the US government is in big trouble and the problems are getting bigger, not better. In the October 25th edition of The Wall Street Journal, a number of articles validate my concerns.

One article points out that TIPS (Treasury Inflation Protection Securities), are gaining in popularity. This means investors are now betting on inflation. For a number of years, TIPS and traditional US Treasury Bonds were running at about the same price. Which gave no indication of inflation or deflation. Bonds are good investments during deflation. TIPS are good investments in inflation.

I knew such a neutral position between bonds and TIPS couldn’t last long. Today, TIPS are so hot that they’re selling for a negative yield. In other words, the fear of inflation is so high that TIPS investors will do anything to get their money into something that won’t lose value. TIPS investors are paying money in order to not loose as much money as they could otherwise, if that makes any sense.

Now, with TIPS becoming hot, it means bond market investors are betting on inflation, not deflation. This is good for gold and silver. Rather than invest in TIPS, I prefer gold and silver. Rather than trust my government, I trust gold and silver. And if traditional bonds became hot, it still wouldn’t change my preference for gold or silver.

The article on TIPS in The Wall Street Journal was only the tip of the iceberg. On the same page were articles with headlines such as:

So, from just one page of The Wall Street Journal, there are four articles indicating inflation, when the article on TIPS is included, and only one article about financial planners advising against gold.

I’m betting gold and not the advisors. What you do is up to you.

The primary reason I hold on to gold and silver is because the US has massive problems still ahead. We have a massive budget deficit, debt that won’t stop, and a dysfunctional political system. On top of that, there are approximately 75 million baby-boomers about to start collecting Social Security and Medicare. Medicare is slated to go broke in 2019, and to make matters worse, President Obama passed Obama care, adding to the costs. This is nuts.

I’m not blaming President Obama. He’s accurate when he says that he inherited the problem. For those of you who’ve read Conspiracy of the Rich: The 8 New Rules of Money, you know that today’s problems started a long time ago and have only grown worse.

I doubt the US can solve our financial problems. We’ll never be able to produce enough to pay our bills. Our budget problems are now too big. Since the US cannot produce more than we spend, the way the US will attempt to solve the government’s financial problems is by printing more money.

And as long as the US is going to print money, I’ll stick with gold and silver. If the government stops printing money, I may start selling.

But if the US stops printing money, you’ll definitely want to buy a gun and enough ammunition to last a while. It may take sometime for the rioting and looting to subside.

Rich Dad’s Advisors: Guide to Investing In Gold and Silver: Protect Your Financial Future

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