A humorous tongue-in-cheek look at what it would be like for Jesus and his family if he were born in the USA within the last decade. Enjoy this modern day Christmas story according to Uncle Sam.
Wise men visited the young Jesus, bringing gifts of gold, frankincense and myrrh. What if He wanted to sell those gifts later on to buy a donkey, feed the poor, clothe the naked, or buy a house?
How would those first Christmas gifts, and subsequent transactions, be treated under US tax law?
If you wouldn't’t mind getting some gold or silver (or frankincense and myrrh) for Christmas, or if you are giving them, you might want to be aware of the potential taxes involved.
Baby Jesus, Wise Men and Taxes
“...and when they had opened their treasures, they presented unto him gifts; gold, and frankincense, and myrrh.” - Matthew 2:11 Here we have wise men giving very expensive gifts to Jesus. Let's look at whether Jesus has any income taxes to pay from receiving these gifts and if there might be a gift tax owed by the wise men.
Income Tax Liability of Jesus
There are no income taxes owed when you receive a gift. Fortunately, Jesus will not have to pay any income taxes on the gifts he received. However, since these wise men came from "the east" we will assume that they are foreigners. If any of Jesus' gifts were worth more than $100,000, He will need to fill out Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts. It’s a good thing the gift is well documented to defend himself in case the IRS thinks Jesus might have unreported income.
The GIVER of a gift must pay a tax if they give someone a gift worth more than $13,000. There is an "exemption amount" that complicates this concept a bit, but for simplicity we will not address it here. Any one of the gifts worth more than $13,000 would cause the wise man who gave it, if they were subject to US taxes, to owe gift tax at approximately the same rate as his income tax (excluding any exemption amount issues).
Maybe that's why they didn't stop by to see Herod on the way out of the jurisdiction.
It will be important to know what Jesus' basis in the gifts are if he ever decides to sell them in the future. The basis is generally the amount the GIVER paid for the item.
Let's assume that the wise men picked up their gifts at a store in Bethlehem right before they gave them to Jesus. Their basis (and subsequently Jesus' basis) is the market value of the goods at the time they were bought (let's say $285 USD for an ounce of each, the approximate spot price of gold in the year 2000, since I don’t have the spot price of frankincense and myrrh handy).
Now let us imagine that Mary and Joseph were pretty good parents and saved these gifts to present to Jesus at His Bar Mitzvah. The day after his Bar Mitzvah, Jesus contemplates buying all kinds of nice things with the gifts the wise men gave him many years before.
The gifts from the wise men are spent.
Uh ohh... Capital Gains Tax
To calculate the gain, we take the difference between the fair market value of the item when spent, less the basis (essentially the original price paid). The price of gold has now risen to over $1,600 in year 2012. Let's also say that the other gifts have had similar gains. When you recognize a gain on the exchange of an asset (like gold, frankincense or myrrh) for something else (another good, cash, etc.), a capital gains tax will apply. For most assets, the capital gains tax is 15% of the gain. Frankincense and myrrh would be taxed at 15%.
Higher Capital Gains Tax on Gold is 28%
Gold is different. Gold is specifically identified in the tax code, along with antiques, rugs, stamps, art and other collectibles, at a 28% capital gains tax rate. Jesus' gain on gold, if exchanged for goods worth $1600, would be $1314 per ounce. Instead of paying 15% of this gain as a tax ($197 per ounce), He will have to pay capital gains tax at a rate of 28% ($367 per ounce).
This highlights a big reason why The Fed deemed gold and silver are not to be regularly used as money, especially while they are appreciating in value. Capital gains tax makes gold and silver more expensive to use as money than other things that are less suited for being money, like frankincense and myrrh. He could get 13% more house if he trades frankincense or myrrh instead of gold.
Render to Caesar the Things that are Caesar's
(but Caesar doesn’t make it easy)
Some gold and silver coins are official US legal tender. Gold Eagles have a face value of $50, even though the current gold spot price value in Federal Reserve Note Dollars is much higher.
Does a $1 gold coin equal $1 in paper money?
The state of the law is that a dollar does not equal a dollar. It seems ridiculous to say that a dollar does not equal a dollar, but in order to avoid prosecution, it might be a good idea for Jesus to record his transactions in gold at the Federal Reserve Note Dollar value instead of the Gold Eagle Dollar face value.
If Jesus paid for a fish-and-loaves dinner for 5,000 people with a $50 Gold Eagle coin, neither Jesus nor the caterer should record the expense or income at $50. They should record the transaction somewhere between the fair market value of the coin or the food.
The same is true if Jesus traded a house worth $160,000 in Federal Reserve Notes for 100 ounces of gold showing a face value of $5,000. I'm sure the property tax assessor will tax him on the Federal Reserve Note Dollar instead of the Gold Eagle Dollar.
Jesus would not have been taxed for the gifts he received from the Magi unless he traded them later for gains, at which point the tax on his gains in gold would have been significant. The Wise Men might have been taxed for giving a gift to Jesus depending on the jurisdiction in which the gifts were obtained.
When dealing with gold and silver coins, it appears that in order to obey one law (current market value of a fiat paper dollar) one would have to disregard another law (the legal tender face value of the US minted coins) and report the Federal Reserve Note paper dollar value instead.
And that my dear friends is the Christmas miracle according to jolly 'ole Uncle Sam if Jesus were born in modern day USA.
The Moral of the Story:
In order to render to Caesar (our government) that which belongs to them, we need to be aware of what is legally theirs and what is not; otherwise they'll just take what they want. If you withhold from Caesar what is theirs, they'll come looking for you. Nobody wants that kind of trouble in their life.
Also, by withholding from Caesar, you'll be held accountable by God. Nobody wants that either. Be informed and aware of tax laws so you can obey the laws of the land that do not conflict with the laws of the Bible.
Oh yeah... and
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