Yesterday I received a pyramid-style chain letter promising over 880,000 dollars if I would merely send out 200 copies of the letter and five one dollar bills, one each to the five most recent senders in my branch of the chain. As usual, there are a number of ridiculous testimonials, including one claiming that he is now buying a house "WITH CASH!!!" This brought to mind the image of someone sitting down with a mortgage broker and diligently counting "873, 426... 873,427... 873,428..." What would you do with 880,000 one dollar bills?
How do you explain your new house to the IRS? Do you declare your 880+ thousand dollars as income from "chain letter"? If so, it immediately puts you into a 35% tax bracket, plus whatever alternative minimum tax applies, so you're probably out a good 300,000 Georges right there. Since it's cash, you could try to hide it, but then you can't make any huge purchases, like houses, and you have to spread them out over long enough that the IRS doesn't notice. Even spending 50k a year would take you 16 years to get through, by which time compounded interest rates have devalued your "assets" by 35% anyway.
Suppose you try to hide it, converting it to some asset that's immune to inflation, and spread it out over the sixteen years or so. You still have to change all those ones somehow, and you can't use bank accounts that would show up to the IRS. Can you trade ones for 100s at a bank where you have an account without creating a record? I guess you could tell them you were a street performer, but then you'd have to use a bunch of different banks, because no one's going to believe a street performer who pulls down 880k+ a year. What do you buy that will hold your investment better than cash, but that doesn't show up in a bank account? I initially thought of diamonds, but this whole "cultured diamonds" development may chip away at the DeBeers cartel over the next sixteen years. Cars? Can you pay for a car with actual greenbacks and not set off some kind of red flag?
Maybe you declare as much as you can each year that will keep you in the 28% tax bracket (total income up to $143,500 or $174,700 if you're married) and pay for everything else in your life with cash. The grocery store, gas, utilities, books, gifts, airline tickets... all in ones. Maybe you just leave a giant sack on the doorstep of your favorite charity. In four years you could get through all of it, paying only 28% on about half of it (if we're including a sizable charitable donation), which is only about $126,000, saving you a grand total of $175,000.
Clearly I am not cut out for money laundering. There's surely an entirely legal way to do it with limited liability partnerships and trust funds that I don't know about.
All of this has led me to two conclusions: 1) On Monday I should call my broker to schedule a meeting about my long-term financial goals, and 2) I should send letters to the five addresses on the chain letter, with one dollar each, a self-addressed, stamped envelope and two questions, "How much money have you received so far?" and "What will you do with all the ones?"