Ever since the Coinage Act of 1965, by which President Johnson dispensed with the Constitutional silver dollar standard that had served the country’s economy for 173 years (with rare exceptions during wartime), tax courts have struggled with the tax implications of the ever widening specie/paper purchasing power gap. During the 20-year moratorium (1965 to 1985) on the mintage of U.S. specie legal tender, the courts developed the judicially-crafted rule of non-circulating and/or numismatic specie legal tender being treated as taxable “property other than money” pursuant to 26 U.S.C. § 1001(b). See, Rev. Rul. 68-634, 1968-2 CB 46; Rev.Rul. 78-360, 1978-2 C.B. 228; Cordner, 45 AFTR2d 80-1677 (DC Calif., 1980); California Federal Life Insurance Co. v. Commissioner of Internal Revenue, 680 F.2d 85 (9th Cir. 1982), affg. 76 T.C. 107 (1981); Joslin v. United States, 666 F.2d 1306 (10th Cir. 1981), affg. 1981 WL 186; Cordner v. United States, 671 F.2d 367 (9th Cir. 1982); Lary v. Commissioner ofInternal Revenue, 842 F.2d 296 (11th Cir. 1988). All of these cases involved tax years which occurred within the mintage moratorium. So arguably specie coin was not technically “circulating,” as legal tender at that time.
However, following the resumption of specie legal tender mintage pursuant to the Liberty Coin and Gold Bullion Coin Acts of 1985, some courts have continued to uncritically extend the rule developed during the moratorium into the new era of specie legal tender circulation. See, Smith v. Commissioner ofInternal Revenue, T.C. Memo. 1998-148 and United States v. Kahre, 2007 WL 1521064. Notably, none of the cases which have embraced the “non-circulating” rationale or in any way acknowledge the Supreme Court’s holding in Thompson v. Butler, which draws into question their validity.