Re: the cost of untracability?

At 05:30 AM 4/7/96 -0700, Wei Dai wrote:

>I think you're right.  There is no need for the issuer to pay explicit
>interest.  The easiest way to eliminate signorage would be to steadily
>increase the value of each denomination of ecash.  It would be kind of
>like a mutual fund that doesn't pay dividends.  In fact, if the ecash is
>backed by a portfolio of investment securities and its value floats with
>the value of the portfolio, then it would be almost exactly like a mutual
>fund.
>
>Of course, as Jonathan Wienke pointed out, the IRS would not be very happy
>about this.  Then again, the IRS would not be happy with a lot of the
>technology discussed on this list.

Some more than others, huh?  B^)

FWIW, I think that there is no capital-gains-type tax on currency 
conversions.  In other words, if I take dollars and buy yen today, and the 
interconvert rate changes and I convert back and make a "profit," that is 
not considered income.  If that's the case, then ecash has an excellent 
precedent behind it to avoid any taxes on interest, especially if that 
interest is, in effect, paid by increasing the inherent value of the currency.

And most of the "interest" will simply be the avoided inflation loss that 
would have otherwise occurred.  Buying ecash may be equivalent to buying an 
absolutely non-inflating currency that the government can't manipulate.

Jim Bell
jimbell@pacifier.com

jim bell <jimbell@pacifier.com> writes:
>FWIW, I think that there is no capital-gains-type tax on currency 
>conversions.  In other words, if I take dollars and buy yen today, and the 

I bounced this off a CPA, who said she would be very suprised if this is
really the case: in general the IRS considers increases in wealth to be
taxable, and unless there's a specific exclusion for currency transactions
that she doesn't know about, she suspects this is not the case.  As a
conceptual counterexample she points out that you are responsible for any
profit you make from selling your car for more than you pay for it (but,
as you might expect, you don't get to take a loss if you sell it for less).

>interconvert rate changes and I convert back and make a "profit," that is 
>not considered income.  If that's the case, then ecash has an excellent 
>precedent behind it to avoid any taxes on interest, especially if that
>interest is, in effect, paid by increasing the inherent value of the
>currency.

My tame CPA also volunteered the information that the IRS is very interested
and concerned about how they're going to capture transaction information for
electronic transactions, and they do think it's in their bailiwick... she's
read some articles on it.

	Jim Gillogly
	17 Astron S.R. 1996, 19:52

On Sun, 7 Apr 1996, Jim Gillogly wrote:

> 
> jim bell <jimbell@pacifier.com> writes:
> >FWIW, I think that there is no capital-gains-type tax on currency 
> >conversions.  In other words, if I take dollars and buy yen today, and the 
> 
> I bounced this off a CPA, who said she would be very suprised if this is
> really the case: in general the IRS considers increases in wealth to be
> taxable, and unless there's a specific exclusion for currency transactions
> that she doesn't know about, she suspects this is not the case.  As a
> conceptual counterexample she points out that you are responsible for any
> profit you make from selling your car for more than you pay for it (but,
> as you might expect, you don't get to take a loss if you sell it for less).

Gains on currency 'speculation' (which this example is, even in the 
absence of intent to profit) are most certainly included in income for 
the purposes of U.S. tax.  Moreover, they are not capital gains income in 
the case of short term transactions like this.  As a result, instead of the 
lower rate on capital gains, they will be taxed at normal graduated rates.

In addition, to prevent funds from being removed to non-resident aliens 
or foreign entities where tax enforcement and collection is difficult, 
there is a 30% withholding requirement in the event the payee is not a 
U.S. citizen or resident (for tax purposes).  Note that this requirement 
is imposed on the paying entity regardless of the disposition of the 
funds.  That would mean that if the e-cash bank were to pay profits to a 
foreign payee without withholding, the IRS would hold the bank itself 
liable and let the bank deal itself with collecting the tax from the 
account holder on its own time and after paying the IRS.

> >interconvert rate changes and I convert back and make a "profit," that is 
> >not considered income.  If that's the case, then ecash has an excellent 
> >precedent behind it to avoid any taxes on interest, especially if that
> >interest is, in effect, paid by increasing the inherent value of the
> >currency.
> 
> My tame CPA also volunteered the information that the IRS is very interested
> and concerned about how they're going to capture transaction information for
> electronic transactions, and they do think it's in their bailiwick... she's
> read some articles on it.
> 
> 	Jim Gillogly
> 	17 Astron S.R. 1996, 19:52
> 

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