David Merrill and friends are under the delusion that, once you maker a demand for lawfulmoney under 12 USC 411, your FRNs transubstantiate into United States Notes and, among other things, are no longer taxable under the income tax laws. To give but one example of how idiotic David and his minions are, they believe that the words "In God We Trust", appearing on FRNs, establishes some sort of legal trust (and if you want an explanation, go to his site. I've had enough of his brand of idiocy).
Merrill actually, sorta, kinda got one almost right, but close only counts in horse shoes and hand grenades, and nuclear war, or so I'm told, since I don't play at any of them. Originally FRN’s weren’t “lawful money” for some reason, I don’t think I’ve ever actually seen an explanation of that, but there you are, they weren’t, and particularly not the large denomination bills, 100's, 10,000's, and 100,000 dollar bills that were used as non-circulating, internal transfer funds. It was a lot easier to shore up a bank with one or two bills/notes as they actually are than sending a carload of smaller ones just to have them sit in the bank’s vault, and when they had the funds they returned the bills to the FED and paid off the loan. Not real complicated. The redeeming lawful money bit was so that if one of the banks had to actually cash one of those non-circs, they could go to their local FED and get small bills to stand against say a run on the bank, or a short term need for a large cash volume. OK, all past history, very past history. In 1933, Congress undid all that by passing 31 USC sec 5103 making them once and for all “lawful money” by making them LEGAL TENDER. These days FED does all its transfers by wire and book keeping entry these days so the redeeming bit really is superfluous. The only time they send out actual currency these days is when a bank buys extra or needs replacement bills, and it is a one for one swap when they do. So Merrill has the delusion that you can redeem “lawful money”(FRN’s) with “lawful money”(FRN’s), silly, but harmless other than defacing countless bills that then get sent back to the FED for destruction since they have been defaced. I suppose he could be charged with defacing currency if someone were feeling pissy about it. The thing I don’t understand, and that he has never actually explained, is why/how claiming he has redeemed“lawful money” somehow makes it tax free. There is the full on cra cra!!!!, and it’s just gullible and stupid on the part of his followers, and even more so, I really don’t understand how scrawling all over your paycheck, red crayon or otherwise, does anything to it either, since it only represents an effectively electronic bookkeeping payment to your account. But then, if it actually had anything behind it, it wouldn’t be a tax avoidance scam, now would it.
So far as I know, all of Merrill’s suitors have met the same end in tax court and court in general, ABJECT and ABSOLUTE FAILURE. Wes, are you still keeping score on their efforts?
notorial dissent wrote:....Originally FRN’s [Federal Reserve notes] weren’t “lawful money” for some reason, I don’t think I’ve ever actually seen an explanation of that....
Regarding the term "lawful money" (or "lawful currency"), here's the excerpt from the Slindee letter that is quoted in various places:
.....the term "lawful money" has not been defined in federal legislation. It first came into use prior to 1933 when some United States currency was not legal tender but could be held by national banking associations as lawful money reserves. Since the act of May 12, 1933, as amended by the Joint Resolution of June 5, 1933, makes all coins and currency of the United States legal tender and the Joint Resolution of August 27, 1935, provides for the exchange of United States coin or currency for other types of such coin or currency, the term "lawful currency" no longer has such special significance.
---Michael E. Slindee, Acting Treasurer of the United States, in a letter to Mr. A. F. Davis of Cleveland, Ohio dated Dec. 29, 1947, published in "A Dollar Is a Dollar Is a Dollar," American Affairs, Vol. 10, p. 88 (April 1948), as re-printed in Money and Banking: Theory, Analysis, and Policy, p. 5, ed. by S. Mittra (Random House, New York 1970); also cited in Paul M. Horvitz, Monetary Policy and the Financial System, p. 28, footnote 3, Prentice-Hall, 3rd ed. (1974).
Back in 1862, when the United States Notes (a genuinely fiat currency) was issued, the statute authorizing it declared the US Notes to be both legal tender and lawful money. It turned out that there had been two proposals for the USNs working through the chambers, one used one term and the other used the other term, and evidently in conference someone rather casually decided to use both terms together. Many years later the Dept of Treasury legal office issued an official opinion that the two terms were simply two names for the very same thing; which, I might add, is not everyone's opinion. In 1913, in the Federal Reserve Act, FRNs were intended to serve as a sort of scrip circulating among the banks and exchangeable for "lawful money" - which, to me and the courts, meant that FRNs were either money or as good as money or usable as money. In 1934, an Act of Congress made ALL the coins and currency issued by the federal govt at any time as "legal tender" (and expressly included FRNs in this law).
Legal tender is the "highest" sort of money; one cannot insist on being paid a superior sort of currency if payment is offered in legal tender. Until 1934, silver coins were legal tender but silver certificates, which promised to be exchangeable for silver coins, were not. However, silver certificates were perfectly acceptable in ordinary business and nearly everybody was satisfied to be paid with silver certificates, which made the silver certificates "lawful money" if not also legal tender; the silver coins were both. Legally, until 1934, a contract could insist on payment in silver coins and the creditor could refuse to accept silver certificates as a substitute, notwithstanding any bank would make the exchange effortlessly.
About the only federally issued currency which was not made legal tender was the China trade dollar, a rather odd (and now extremely rare) silver coin issued circa 1880, intended exclusively for transactions in China. It was an odd weight, different from any of the US silver dollars.
Besides court decisions that FRNs are now both legal tender and (under the Federal Reserve Act) lawful money, the fact that $1 FRN can be readily exchanged for 100 US Mint pennies, or ten dimes, etc. shoud be proof that it is lawful money.
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