Posted on 03/07/2021 3:41:19 PM PST by DUMBGRUNT
Konstantin Anikeev, an experimental physicist, assembled everything he needed for an inquiry far outside his field.
His materials included American Express cards, the government’s view that credit-card rewards aren’t income, and his own willingness to spend time buying gift cards and money orders. He pulled the concept from personal-finance websites: Exploit the difference between unlimited 5% rewards and lower fees on gift cards and money orders.
“If one has a theory, one can test it experimentally. Some are easier to test,” Mr. Anikeev said. “Others require a Large Hadron Collider or something like that. But this one was a bit more accessible.”
It (mostly) worked.
Mr. Anikeev’s financial-optimization plan in 2013 and 2014—including $6.4 million in credit-card charges—led to an Internal Revenue Service audit and a finding that he and his wife had more than $310,000 in income that should have been taxed.
So Mr. Anikeev used his AmEx card to buy prepaid Visa gift cards at grocery stores, routinely stopping during his commute and purchasing the maximum allowed per day at a store. He often used the gift cards to buy money orders, then used the money orders to make deposits in his bank account, then used that money to pay his credit-card bill.
“He’s a very mathematical, brilliant person,” said his lawyer, Mr. Sklarz. “And this was just something he thought was fun.”
(Excerpt) Read more at wsj.com ...
The basic rule is: If it increases your net worth, and the government has not excepted it from income, then it is income.
Not exactly but I understand your point. It’s the fact that he used the rewards to buy gift cards at a 5% discount and converted those gift cards into cash on a very large scale. If he just used points like most people do (pay down the bill, airline miles, discounts etc) it shouldn’t be income (in fact you could argue in some cases it’s just a ‘reduced interest rate’). But he figured out a multi-step process to convert points into passive income (or not so passive considering all the steps he had to take each transaction).
FR: Never Accept the Premise of Your Opponent’s Argument
Patriots are reminded that the delegates to the Constitutional Convention (Con-Con) had made the Constitution’s first numbered clauses, Sections 1-3 of Article I, evidently a good place to hide these clauses from Congress (sarc), to clarify the following.
Only elected members of Congress have the legislative power to make federal laws, not the executive or judicial branches, or non-elected bureaucrats running constitutionally undefined, so-called federal regulatory agencies like the IRS, EPA, etc., that tax-hungry, power-hungry members of Congress now hide behind.
So hypothetically speaking, let’s say that all US citizens made money on credit card rewards. The way that the delegates to the Con-Con had intended for taxpayers to respond to unpopular federal tax policy is this.
Whenever Congress decides to count credit card rewards as income for example, the correct response for taxpayers is simply to elect a new Congress that not only promises that credit card rewards will not be counted as income, but also promises that Congress will appropriate taxes only for things that it can reasonably justify under Congress’s constitutional Article I, Section 8-limited powers.
"Congress is not empowered to tax for those purposes which are within the exclusive province of the States." —Justice John Marshall, Gibbons v. Ogden, 1824.
If deposits were below $10k and regular, again reported to the IRS as Structuring.
The IRS then figured there was tax owed somewhere and was going to get it no matter the cost.
California wants to come after me for money from recyclable container returns.
That is after I paid sales tax on top of the container fee, which is not refundable.
Once again, thanks for the archive link to wsj article. Appreciate it!
A fun adventure with air miles.
Thanks, I enjoyed it.
And interestingly, I suspect all involved in the transactions came out ahead on the deal.
They lose money on every sale, but make it up on volume.
—” without a paywall.”
A minor note:
No paywall with the link in #2.
Yes, your link had some additional information.
Thanks
Lot of great scenes in that movie!
YES! YES! YES!
And for some reason, this one is a personal favorite.
https://www.youtube.com/watch?v=Fj5k6toS7i8
—”If it increases your net worth, and the government has not excepted it from income, then it is income.”
Sounds fair to me, but...
In the WSJ comments are many tax professionals and that is not how they see it; they also make the case that the Judge is out of line on this one by creating new tax law and many problems.
He was just doing circular money loops, not purchasing goods and getting a discount.
Clearly he was gaming the system.
Even with paying taxes, he will have made quite a bit of money. The issue is that most likely he has spent it.
Yeah, I miss Sam Kinison!
For $500 card purchase +$25 rebate, $5 card fee, and $1 money order.
It’s like a partial refund on paying your credit card bill. The money you use to pay your credit card bill has already been taxed.
From the article the physicist found out about it from online sources and tried it as an experiment that worked. My guess is you need to find a supermarket chain that will let you turn their gift cards into money orders. The other key is not to be left holding onto gift cards you can't convert to cash when the supermarket decides to change its policy on converting gift cards to money orders.
lol
Rd later.
I’ve done that. Mostly at stores I seldom shop at. They’ll sign you up for the card right at the register, get the discount, pay off the balance and cancel the card.
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