Provocative inducements for buying books

Three reader questions to ads in magazines aimed at retirees are typical of less-than-candid inducements to buy a book or newsletter. These ads raise questions and intimate that answers would be beneficial to readers. In these ads or common direct-mail solicitations, the "big promise" is everything. Favorable answers to the questions may appear to be legal and truly innovative, but could be risky or so time-consuming as to be impractical.

1. Is it possible to earn interest on gold and silver?

Either or both of these rare and precious metals earn no income for the owner. Without the potential for earned income, there is no reason to expect either regular interest or dividends. In fact, you can expect to pay a storage fee for holding gold or silver in a vault, either in the United States or Europe -- usually Switzerland. The cost of storing metal bars may be offset by avoiding sales tax and an assay fee on resale.

An individual owner of gold and silver might lend another person or organization bars or coins for the other person to use as collateral for a loan or to margin a commodities trading account. A loan agreement could specify the price and interest rate based on that price. Such a plan would be unusual and would depend on the objectives of the two people involved.

An owner of gold and silver may earn effective interest through a reduced rate, with gold or silver used as collateral. Many banks will not accept gold or silver as collateral, but if one will accept the metals, a collateralized loan will cost less interest than some other type of loan or by using collateral with greater risk. Only a portion of the value of gold and silver will be accepted to reserve a margin if the gold and silver should be sold to satisfy the loan.

Generally gold and silver are purchased for either or both of two purposes. One is the potential for making a profit if the metals are purchased at a low price and sold later at a higher price.The other is to hold gold and silver, usually in the form of coins, as a hedge against hyperinflation by which paper money loses practically all of its value.

2. How can one buy Swiss francs at a discount?

This is the same as asking where and how you can buy dollars at a discount. Swiss francs are money -- and are highly prized currency in world circles. In every case I know about, you could expect to pay a premium or an exchange fee when changing dollars into swiss francs -- or almost any other currency. Some illegal means might be available for exchanging dollars for swift francs if the holder was dealing in stolen currency or had been paid in Swiss francs for some activity for which he would prefer not to exchange the francs directly.

Many countries are in less fortunate circumstances than Switzerland, and their currency is traded openly on the black market at more favorable rates than the official standard. Depending on the country and the circumstances, buying currency on the black market entails some risks. Usually such transactions can be completed only within the country or near its borders.

3. How can one turn his family into a legal tax-free foundation?

This myth of somehow operating a family as a charitable or tax-free foundation persists even though the IRS has either closed every loophole or encased it with so many restrictions as to be unworkable. Tax-free family foundations exist, but they must produce income for distribution to recognize charities. One foundation that worked for a while enabled a family to pay college expenses with before-tax dollars. This plan is no longer available. While some possibilities remain, they represent a high-risk area subject to IRS audit and possible penalties. Before embarking on any plan to establish a family foundation, consult with a tax-wise attorney -- and then proceed cautiously.

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