What scrutiny to expect if making large purchase with physical cash? [duplicate]
http://www.consumerismcommentary.com/buying-house-with-cash/ It looks like you can, but it's a bad idea because you lack protection of a receipt, there's no record of you actually giving the money over, and the money would need to be counted - bill by bill - which increases time and likelihood of error.   In general, paying large amounts in cash won't bring up any scrutiny because there's no record. How can the IRS scrutinize something that it can't know about? Of course, if you withdraw 200k from your bank account, or deposit 200k into it then the government would know and it would certainly be flagged as suspicious.
You have 3 assumptions about the use of credit cards for all your purchases: 1) May be a moot point. At current interest rates that will not make much of a difference. If somebody links their card to a checking account that doesn't pay any interest there will be no additional interest earned. If the rate on their account is <1% they may make a couple of dollars a month. 2) Make sure that the card delivers on the benefits you expect. Don't select a card with an annual fee. Cash is better than miles for most people. Also make sure the best earnings aren't from only shopping at one gas station or one store. You might not make as much as you expect. Especially if the gas station is generally the most expensive in the area. Sometimes the maximum cash back is only for a limited time, or only after you have charged thousands of dollars that year. 3) It can have a positive impact on your credit rating. I have also found that the use of the credit card does minimize the chances of accidentally overdrawing the linked account. There is only one big scheduled withdraw a month, instead of dozens of unscheduled ones. There is some evidence that by disconnecting the drop in balance from the purchase, people spend more. They say I am getting X% back, but then are shocked when they see the monthly bill. What is the best way that I can invest money so that I can always get   returns? If you want something that doesn't require any work on your end, consider having a fee-only financial planner make a plan so that your investments can be automated to generate a cash flow for you or get an annuity as the other classic choices here as most other choices will require some time commitment in one form or other. Note that for stock investments there could be rare instances like what happened for a week in September in 2001 where the markets were closed for 5 days straight that can be the hiccup in having stocks. Bonds can carry a risk of default where there have been municipalities that defaulted on debt as well as federal governments like Russia in the 1990s. Real estate may be subject to natural disasters or other market forces that may prevent there always being a monthly payment coming as if you own a rental property then what happens if there aren't tenants because there was an evacuation of the area? There may be some insurance products to cover some of these cases though what if there are exceptionally high claims all at once that may have an insurance company go under? Would it be to set up an FD in a bank, to buy land, to buy a rental   house, to buy a field, or maybe to purchase gold?  What investment of your own time do you plan on making here? Both in terms of understanding what your long-term strategy is and then the maintenance of the plan. If you put the money in the bank, are you expecting that the interest rate will always be high enough to give you sufficient cash to live as well as having no financial crisis with the bank or currency you are using? Are there any better investments? You may want to reconsider what assumptions you want to make and what risks you want to accept as there isn't likely to be a single solution here that would be perfect. Fundamentally interest rates reflect the time preference people place on money and the things money can buy.  If I have a high time preference then I prefer money in my hand versus money promised to me at some date in the future.  Thus, I will only loan my money to someone if they offer me an incentive which would be an amount of money to be received in the future that is larger than the amount of money I’m giving the debtor in the present (i.e. the interest rate). Many factors go into my time preference determination.  My demand for cash (i.e. my cash balance), the credit rating of the borrower, the length of the loan, and my expectation of the change in currency value are just a few of the factors that affect what interest rate I will loan money. The first loan I make will have a lower interest rate than the last loan, ceteris paribus.  This is because my supply of cash diminishes with each loan which makes my remaining cash more valuable and a higher interest rate will be needed to entice me to make additional loans.  This is the theory behind why interest rates will rise when QE3 or QEinfinity ever stops.  QE is where the Federal Reserve cartel prints new money to purchase bonds from cartel banks.  If QE slows or ends the supply of money will stop increasing which will make cash more valuable and higher interest rates will be needed to entice creditors to loan money. Note that increasing the stock of money does not necessarily result in lower interest rates.  As stated earlier, the change in value of the currency also affects the interest rate lenders are willing to accept.  If the Federal Reserve cartel deposited $1 million everyday into every US citizen’s bank account it wouldn’t take long before lenders demanded very high interest rates as compensation for the decrease in the value of the currency. Does the Federal Reserve cartel affect interest rates?  Yes, in two ways.  First, as mentioned before, it prints new money that is loaned to the government.  It either purchases the bonds directly or purchases the bonds from cartel banks which give them cash to purchase more government bonds.  This keeps demand high for government bonds which lowers the yield on government bonds (yields move inverse to the price of the bond).  The Federal Reserve cartel also can provide an unlimited amount of funds at the Federal Funds rate to the cartel member banks.  Banks can borrow at this rate and then proceed to make loans at a higher rate and pocket the difference. Remember, however, that the Federal Reserve cartel is not the only market participant.  Other bond holders, such as foreign governments and pension funds, buy and sell US bonds.  At some point they could demand higher rates.  The Federal Reserve cartel, which currently holds close to 17% of US public debt, could attempt to keep rates low by printing new money to buy all existing US bonds to prevent the yield on bonds from going up.  At that point, however, holding US dollars becomes very dangerous as it is apparent the Federal Reserve cartel is just a money printing machine for the US government.  That’s when most people begin to dump dollars en masse. "This is kind of halfway between the stuff I was talking about, and halfway to the stuff I don't want to get into. But it raises some very legitimate and relevant points that are kind of separate from the ""gold standard"" debate.   The big question, taking the banks out of it, is a two-fold one, that goes something like this:   - Is it possible to have a modern economy without credit-markets? and...  - Is it possible to have functional credit-markets without some sort of fractional-reserve currency?  For example, let's say Toyota decides to design a new car. Before they can sell a single unit, someone in Africa or somewhere has to dig up the minerals to make it, someone has to design it, tools have to be re-worked, all that kind of stuff. Building ONE CAR of a new design might cost [a billion dollars or more](http://en.wikipedia.org/wiki/Lexus_LS).   Obviously it's not realistic for Toyota to expect the first customer to pay that much: they amortize the design and tooling costs over the expected production run or whatever. Moreover, we might say that only companies that have amassed a billion dollars in physical gold from previous sales should be *able* to do that kind of thing...  But there is a relevant question of whether this makes any kind of sense. Should Toyota have to literally ship palettes or dufflebags of physical gold through middlemen and suppliers to the miner in Africa, down to the actual guy who digs up the aluminum or whatever, in order to make this transaction happen?   How would that work, without some sort of intermediary ""promises""?   I'm imagining a scenario where Toyota sends an armored truck full of gold out to go find half-a-ton of aluminum. The drivers cannot rely on any promises or ""fractional reserve"", they must only trade the physical gold in their truck for actual aluminum or expenses along the way...   This starts to defy sanity, in a modern economy. You have to rely on the promises of middle-men and suppliers and contractors and so on. And the instant you have promises, you have fractional reserves, because people are getting paid and money is changing hands that hasn't been minted yet.   It's not just the impracticality of your local supermarket having to trade a bag full of gold for a shipment of lettuce, it's that contracts to purchase would be meaningless, because the driver would have had to give a smaller bag of gold to the supplier, who gave a smaller bag of gold to the grower, and so on... moreover, the supermarket would have to just wait to see what entrepreneurial driver shows up and what they have.   The supermarket obviously cannot ""order"" a hundred heads of lettuce per week with a promise to pay, not unless we also give the supplier permission to order a hundred heads of lettuce a week from the grower, and the grower permission to order seed and hire workers sufficient to grow a hundred heads of lettuce a week, and the workers permission to set up car-payments to get to work, and the seed-supplier to so on and so on...  That sequence of promises is ipso-facto a ""fractional reserve"" system, with or without a central bank. People are promising to deliver gold/cash/whatever that they don't currently have. Moreover, it is entirely possible in a gold-denominated currency for everyone to *keep* those promises, since the gold, like any currency, just keeps changing hands and cycling through the economy.   Your example of ""gold certificates"" is exactly equivalent to privately-arranged contracts/promises to produce a certain amount of gold on completion. It's promises all the way down, unless we insist on instant cash-transactions, e.g., literally handing an employee a dollar's worth of gold every five minutes, or whatever. If the employee is counting on the good-faith of the employer to settle up at the end of the day or week, then we have a fractional-reserve system whether decreed or not.   When you buy an iPhone or a laptop, someone had to dig up the stuff to make it, out of the ground. When you buy a cheeseburger, someone had to grow wheat and someone else had to raise and kill a cow. It's not a reasonable proposition that they should wait for you to show up with a bag of gold before doing those things, in this day and age.   We trade in promises and IOUs. Sometimes that backfires, sometimes catastrophically. But it's remarkable how well it *does* work, most of the time, and how much better it works than the times and places where people had to trade physical goods for physical goods.   This is not an argument against a gold-backed currency." "Some banks allow mint.com read-only access via a separate ""access code"" that a customer can create.  This would still allow an attacker to find out how much money you have and transaction details, and may have knowledge of some other information (your account number perhaps, your address, etc). The problem with even this read-only access is that many banks also allow users at other banks to set up a direct debit authorization which allows withdrawals.  And to set the direct debit link up, the main hurdle is to be able to correctly identify the dates and amounts of two small test deposit transactions, which could be done with just read-only access. Most banks only support a single full access password per account, and there you have a bigger potential risk of actual fraudulent activity. But if you discover such activity and report it in a timely manner, you should be refunded. Make sure to check your account frequently. Also make sure to change your passwords once in a while." "In the United States, regulation of broker dealer credit is dictated by Regulation T, that for a non-margin account, 100% of a trade must be funded. FINRA has supplemented that regulation with an anti-""free rider"" rule, Rule 4210(f)(9), which reads No member shall permit a customer (other than a broker-dealer or a “designated     account”) to make a practice, directly or indirectly, of effecting transactions in a cash     account where the cost of securities purchased is met by the sale of the same securities.     No member shall permit a customer to make a practice of selling securities with them in a     cash account which are to be received against payment from another broker-dealer where     such securities were purchased and are not yet paid for. A member transferring an     account which is subject to a Regulation T 90-day freeze to another member firm shall     inform the receiving member of such 90-day freeze. It is only funds from uncleared sold equities that are prohibited from being used to purchase securities. This means that an equity in one's account that is settled can be sold and can be purchased only with settled funds.  Once the amount required to purchase is in excess of the amount of settled funds, no more purchases can be made, so an equity sold by an account with settled funds can be repurchased immediately with the settled funds so long as the settled funds can fund the purchase. Margin A closed position is not considered a ""long"" or ""short"" since it is an account with one loan of security and one asset of security and one cash loan and one cash liability with the excess or deficit equity equal to any profit or loss, respectively, thus unexposed to the market, only to the creditworthiness of the clearing & settling chain. Only open positions are considered ""longs"" or ""shorts"", a ""long"" being a possession of a security, and a ""short"" being a liability, because they are exposed to the market. Since unsettled funds are not considered ""longs"" or ""shorts"", they are not encumbered by previous trades, thus only the Reg T rules apply to new and current positions. Cash vs Margin A cash account cannot purchase with unsettled funds.  A margin account can.  This means that a margin account could theoretically do an infinite amount of trades using unsettled funds.  A cash account's daily purchases are restricted to the amount of settled funds, so once those are exhausted, no more purchases can be made. The opposite is true for cash accounts as well.  Unsettled securities cannot be sold either. In summation, unsettled assets can not be traded in a cash account." I'd worry about being robbed or losing the money en-route. Is it likely? Probably not. But wow, I wouldn't want to lose serious money in one shot. I have fond memories of the time I was serving as treasurer for a non-profit organization and I was taking $30,000 in contributions to the bank. As I walked across the parking lot with all that money in my brief case, I thought, I would really hate to be robbed right now. When I've moved long distances in the past, I've simply written myself a check from my old account and then deposited that amount to my new account. These days I presume I'd do an electronic transfer. I live in the US so I don't know what the conventions are in Europe, but around here, 5% would be an outrageous fee. I once paid $20 for an electronic transfer of around $3,000, and I considered that an excessive fee. I can understand the bank charging a few bucks, but. I'd check around if there are not other banks with more reasonable fees. When you get into reading Revenue Rulings and Treasury Regulations - I'd suggest hiring a professional to do that for you. Especially since you also need to assure that the new stock does indeed qualify as QSBS. However, from the revenue ruling you quoted it doesn't sound like there's any other requirement other than reporting the subsequent purchase as a loss on your schedule D. I wouldn't know, however, if there are subsequent/superseding revenue rulings on the matter since 1998. Professional tax adviser (EA/CPA licensed in your State) would have the means and the ability to research this and give you a proper advice.