nohbdy

I'd pay shipping on a $500 order if they really send me 133.9lbs of dollar coins

cepheid

It doesn't matter; miles, points, or any cash rebate earned through CC purchases are considered to be a form of post-purchase rebate and hence are not taxed or taxable.

Lyrrad

There was an argument in the FatWallet thread on this deal. Some thought that the gains you get from this could be considered taxable as a capital gain, since you're purchasing the coins for the purpose of getting the rewards, which reduces the cost basis of the coins. Others disagreed. It's tough to say. However, with some people apparently depositing six figures worth of coins into the bank I think we're going to have some interesting posts in this thread next summer.

cepheid

No, we won't. Credit card companies do not submit 1099s for the value of the miles, or even for cash rebates. The IRS has no way to track how much (in miles or cash) a person has received through CC rewards, and the IRS own guidelines explicitly spell out that CC rewards are not taxable.

Forget the fact that these are coins. Let's say I buy 10,000 generic widgets for $1 each, and sell them for $2 each. My CC rewards reduce the cost basis of my widgets, but I am still taxed only on the $1-per-widget profit, not on the profit after accounting for CC rewards. That is exactly why small business owners love reward-earning cards, and why there are so many CCs with "business" in the name.

Disclaimer: I am not a licensed CPA.

Oh, and welcome to FT, Lyrrad.

mrpickles

Let us know if they deliver, because I could do that every week no problem!

troyb

What I don't think many people here realize is that all banks are required to follow the Know Your Customer (KYC) program as well as file Suspicious Activity Reports (SARs). SARs are filed when cash transactions over $10,000 (if I remember correctly) take place. While large cash transactions are not illegal by any means, I certainly wouldn't want to deal with the hassle that comes along with being investigated by a government agency for something like this. Ultimately, you'd be able to justify the transactions rather easily, but it would be a PIA regardless.

What IS illegal is structuring. So if you are going from branch to branch, depositing amounts less than $10,000 to avoid having an SAR filed, you might be in for a surprise. Banks have software that tracks transactions across multiple branches for this very reason. So even if you are making multiple smaller deposits for a legitimate reason (i.e., branch does not want to take all of your coins), I would not split them up, as this would be a lot harder to explain.

Dreading

That's a really good point. I thought about that yesterday when I was depositing in a neighboring town. I was going there for a party anyway, and thought I'd take advantage of the opportunity to do a deposit somewhere I wouldn't normally go. But so far, my local bank branch hasn't complained at all, so it might sound hollow to try to say I was trying to avoid overwhelming them. Not that someone could find any evidence of me doing anything illegal...but still it could make life harder to have to discuss this with the feds and have them snoop around and have to come to the conclusion themselves that everything is legit.

I think this also comes down to it being a really good idea to keep all receipts for this - printed and email. In my case, I'd be able to show that some of the splitting was due to getting shipments at different times.

Lyrrad

Yeah, I was mainly referring to the likelihood that at least some people would be investigated for 100Ks worth of deposits into banks, if the information was passed onto the IRS.

The argument on FW that it might be taxable seems to be that in the usual case, the transactions are not done with the purpose of getting the rewards, and that as soon as you receive the coins (worth say $1 each), you realize a gain.

The ruling that people in that thread are referring to appears to be a private letter and not binding on any other taxpayer.

For example, what if a company was formed that purchased $1M in these coins, and made a 20K profit. Should those gains be taxable?

I'm really not sure.

Thanks.

broadwayblue

If a company makes 20k profit why wouldn't those gains be taxable? I'm not sure what the $1M in coins has to do with it.

aviators99

I think he means that they make a $20k profit by using the miles somehow.

dayone

It's a $20K rebate, not "a $20K profit." It's not a taxable event. Similar to the early payment discount that a company might earn for a quick settlement of a purchase invoice.

A lot of the tax, accounting, bank and cash management advice being dispensed seems to be by people who stayed at a Holiday Inn Express last night.

aviators99

IANAA, but one difference is that in the hypothetical, the company was formed *just for the purpose* of earning miles, and using them to create retained cash. It's an interesting hypothetical.

dayone

Extreme cases make bad law.

Easy Victor

I'm sorry if this has been answered before, but why would the bags of coins be more expensive that the boxes of same?

For example: a box of 250 $1.00 Prez coins are $250.00. A bag of the same prez $1.00 coin, 250 pc is $319.95.

ncfinfan

One is meant for circulation while the other is designed for collectors.