FW lawyers and other professionals - Petition to assist FW members suffering from retailer lawsuit

nsdp said:   
I buy $10k of coins at the Mint and get $500 back on my credit card and deposit the coins into my bank account without waiting the time period for long term capital gains then I have a short term gain of $500 that I have to pay taxes on. You can't call it an investment when you have a $0 cost basis. Or if you have business expense and write off the whole expense you have an offsetting income to be reported. Other twist is you get 100% of the expense reimbursed by your employer, then you have reportable income. If you buy diapers for your baby (nondeductable) then no income tax.

Can you elaborate a bit--Why is it that if I buy a $10,000 stero system, the $500 is a rebate, but if I buy $10,000 of money, the $500 is a capital gain?

SUCKISSTAPLES said:   I thought Your hypothetical was "if I did the exact same thing they did , would I take the deal" and the answer is probably yes.

Personally I've never churned a FatCash merchant for repeated orders, but that doesn't mean I can't stand up when I believe there's an injustice being done to another fw member

No matter how you look at this, they took $650,000 from Nordstrom and never intended to purchase those $23 million in merchandise. That definitely has to be fraud.

newbietx said:   Wait till FW one day gets hit with a subpoena to hand over all PM messages exchanged on its site

They come with a gag order. It could have already happened without you knowing.

TravelerMSY said:   All of this is so much easier with toasters or frequent flier miles. Pretty sure the IRS issued an opinion saying they weren't going to attempt to tax the value of miles, although that was years ago before it was possible to accumulate millions of miles relatively easily.
Did you miss the thread where $iti sent out 1099 for miles given to checking account customers and valued them at 2.5c/mile.

TravelerMSY said:   Yes. That is a new wrinkle. But as far as I know, the IRS didn't tell them to so so.
Was that a bank account bonus or cc bonus?

Bank account bonuses are always issued a 1099 and call the gift "interest "

Cc bonuses generally do not result in 1099

nsdp said:   

As long as you don't get any cash or other items of value(jury's opinion not yours) then you are ok. These guys got Cash Back. That's not ok.

What would have happened, had the Chiu brothers not withdrawn this amount and simply let it stay in their FW account? Would nord strum have sued FW?

I ask because I remember reading a similar case where some lady had a faulty deposit show up in her bank account. Apparently it was related to the UN and the bank account # was very similar to this person's account. This kept going on for a few months, until the bank discovered a discrepancy and asked for funds back (not all the deposits, just one or two) She refused and sued the bank, stating that as long as the money was deposited in her account, it was hers. Big mistake, as they then investigated everything and finally charged her criminally.

^for 20 million gains,
Not violating t and c, legal
Unknowingly violates t and c, civil matter
Knowingly violates t and c, fraud.

MilleniumBuc said:   glxpass said:   calvinandhobbes said:   glxpass said:   The problem is that the IRS hasn't explicitly stated this, just that most people think that credit card Cash Back is similar to a cash rebate, which isn't taxable. The problem with a high profile case like the Chiu's is that there's a risk that the IRS might take an interest in such a huge amount, and we could find ourselves up sh*t creek.The issue would arise when credit card rewards exceed the amount spent to receive them. Here, nothing was spent to receive them (I suppose the brothers could claim expenses like computer, ISP, etc to lower their net income), thus there would be tax implications.
Which is why I never declare in fees, such as online tax payment fees, as deductions to income on my tax return, when those fees have resulted from using a credit card with Cash Back. That's also why I just put the Cash Back into a deposit account (which has many sources of deposits) rather than establishing a link from a Cash Back reward to buying an item. The latter is particularly appropriate if you've a business. At least, that's my understanding of the issues involved.

Which brings the following question:

If you donate with a Cash Back card, do you need to reduce the amount of the Cash Back on your taxes? Would it make any difference if you pay off the balance every month vs pay interest on it, since you could claim that is a discount on the interest paid and not a cash rebate.
I'm not a tax expert, nor do I pretend to play one on TV or elsewhere, but see this Private Letter Ruling from the IRS. As I understand it, a PLR just applies to the case in question and isn't meant to set a precedent. Among other things, the PLR seems to state that you can deduct a charitable contribution funded in full from credit card Cash Back and that you needn't pay taxes on that Cash Back amount. Paying off or not a credit card balance has no effect on the taxability question, AFAIK.

dshibb said:   nycll said:   ^for 20 million gains,
Not violating t and c, legal
Unknowingly violates t and c, cival matter
Knowingly violates t and c, fraud.

So anytime I knowingly violate a contract from here on out I have committed criminal fraud?

????

nycll said:   dshibb said:   dshibb said:   nycll said:   ^for 20 million gains,
Not violating t and c, legal
Unknowingly violates t and c, cival matter
Knowingly violates t and c, fraud.

So anytime I knowingly violate a contract from here on out I have committed criminal fraud?

????You have to knowingly gain, the "victim" has to unknowingly (before your act is discovered) lose something. In other words, there needs to be deception, which your coupon stacking example with violation of T&C certainly is. The monetary amount has to be material, which 20 million certainly is.

Interesting so if you don't mind I'm going to probe a little deeper.

So explain to me how breaching a contract like a mortgage or revolving credit wouldn't constitute criminal fraud then? I knowingly gained. They didn't know they were going to lose something. What's the difference then?

And if the amount is material than explain to me how companies can breach contracts with each other all the time for amounts larger than $20 million and not get charged with criminal fraud?

Also I've never before seen an example where the amount moves an issue from a civil case to a criminal case. If you don't mind me asking what is that amount cut off and if it defers based on the case please provide examples of the situation with a cut off in each case.

dshibb said:   Interesting so if you don't mind I'm going to probe a little deeper.It is fine, and your questions are easy.

So explain to me how breaching a contract like a mortgage or revolving credit wouldn't constitute criminal fraud then? I knowingly gained. They didn't know they were going to lose something. What's the difference then?Yes, if at time you take out the loan you intentionally planned not paying it back. So there is really no difference of definition in the mortgage and coupon stacking examples.

The prosecution needs to prove beyond reasonable doubt the existence of your deception. It is not easy but can be done. For example if you happen to have bragged that you took out a loan from chase that you never going to pay back to someone who will testify and seems credible to the jury, then you are toast.

And if the amount is material than explain to me how companies can breach contracts with each other all the time for amounts larger than $20 million and not get charged with criminal fraud?At the time they sign the contracts (which is equivalent to the time you use the coupons), they have to do it in good faith; otherwise it is fraud.

How else do you think Maddoff is put in prison, eh?

Also I've never before seen an example where the amount moves an issue from a civil case to a criminal case. If you don't mind me asking what is that amount cut off and if it defers based on the case please provide examples of the situation with a cut off in each case.It doesn't move from one to another. It it either a crime or not a crime. Let's leave the civil cases out of this since it has nothing to do what is a crime.

I hope you have the basic understanding of American legal system based on case laws and jury trials. A hard cut off number is kind of the wrong thing to ask. But 20 million is material.

Btw, do you actually disagree with any of my answers to your three examples, or just trying to be dense here?

calvinandhobbes said:   dshibb said:   I'm calling them ignorant for dropping clearly dumb analogies that aren't applicable.I would easily call much of what you have posted as ignorant as well, which would be my opinion, just like your words are your opinions.

You claim the brothers never gave Nordstroms false information. They told Nordstroms they wanted over $20 million in merchandise. I think we can both agree that that is certainly false information. Or are you still ignorant?
Careful Calvin. You're questioning the guy that has irrefutable proof that 2 + 2 = 5.

BetterDays said:   calvinandhobbes said:   dshibb said:   I'm calling them ignorant for dropping clearly dumb analogies that aren't applicable.I would easily call much of what you have posted as ignorant as well, which would be my opinion, just like your words are your opinions.

You claim the brothers never gave Nordstroms false information. They told Nordstroms they wanted over $20 million in merchandise. I think we can both agree that that is certainly false information. Or are you still ignorant?
Careful Calvin. You're questioning the guy that has irrefutable proof that 2 + 2 = 5.

Wow still holding a grudge, eh? How pathetic.

And its you that had a study that showed 2 + 2 = 5 and as other people came on to explain how dumb your point was you wanted to stay defiant.

dshibb said:   BetterDays said:   calvinandhobbes said:   dshibb said:   I'm calling them ignorant for dropping clearly dumb analogies that aren't applicable.I would easily call much of what you have posted as ignorant as well, which would be my opinion, just like your words are your opinions.

You claim the brothers never gave Nordstroms false information. They told Nordstroms they wanted over $20 million in merchandise. I think we can both agree that that is certainly false information. Or are you still ignorant?
Careful Calvin. You're questioning the guy that has irrefutable proof that 2 + 2 = 5.

Wow still holding a grudge, eh? How pathetic.

And its you that had a study that showed 2 + 2 = 5 and as other people came on to explain how dumb your point was you wanted to stay defiant.
So just out of curiosity, why did you avoid answering Calvin's question to you?

BetterDays said:   dshibb said:   BetterDays said:   calvinandhobbes said:   dshibb said:   I'm calling them ignorant for dropping clearly dumb analogies that aren't applicable.I would easily call much of what you have posted as ignorant as well, which would be my opinion, just like your words are your opinions.

You claim the brothers never gave Nordstroms false information. They told Nordstroms they wanted over $20 million in merchandise. I think we can both agree that that is certainly false information. Or are you still ignorant?
Careful Calvin. You're questioning the guy that has irrefutable proof that 2 + 2 = 5.

Wow still holding a grudge, eh? How pathetic.

And its you that had a study that showed 2 + 2 = 5 and as other people came on to explain how dumb your point was you wanted to stay defiant.
So just out of curiosity, why did you avoid answering Calvin's question to you?

Looks like I missed it. I answer practically everything that is asked of me on these forums so I'm not one of those people that dodges questions unlike a few others.

From my viewpoint I don't consider orders not intended to be kept as 'false material information'. But I've answered that before as well.

nsdp said:   I understand your confusion which in part is due to the fact that the appellate decisions are not the same in each of the twelve circuit courts of appeals. http://www.cybercrimereview.com/2012/04/ninth-circuit-en-banc-ad... If the differences are great enough they will wind up before the Supreme Court for solution. Right now there are two answers. The 9th circuit decision in Nosal v United States says you are not guilty of anything. http://www.ca9.uscourts.gov/datastore/opinions/2012/04/10/10-100...
However if you live in the 5th , 3rd, 7th(I was wrong in thinking that the 7th hadn't addressed this, they did it in a civil case not criminal), 3rd and 11th circuits you get the opposite result. So the result is going to depend on where you live, where the merchant is, and where the IRS service Center you file your taxes are. For example if you live in Kentucky you file your tax return in Austin. I represented several Kentucky residents on criminal tax matters because IRS didn't want to try the case in Kentucky. Austin and San Antonio are death on tax cases. The only place worse is Ogden Utah. That is why most corporate tax are sent there.

Given the difference in opinions between the circuits I can't give you a hard and fast rule. The Chui brothers were in good shape on the usual three considerations. things get complicated because FW figures in the mix and allows the case to be prosecuted in the 7th circuit in Wisconsin. The government gets to chose where they charge the offense.

What I can tell you is that you are ok as of today in the 9th circuit, a dead duck in the 3rd, 5th, and 11th, probably dead in the 7th and unknown in the remainder. Not the answer you want to get but there is no clear bright line unless and until the Supreme Court decides to take up the matter there won't be. This might be a case where Justice Thomas and Scalia may surprise and rein in the government. The facts are so bad here I would not have to argue a case like this one. Nosal looks like a tough one to me.

Not sure that this will give you any comfort but the Sentencing Commission on page 11 authorizes the use of the financial "gain" by the defendant in lieu of the "loss" of the victim in determining the sentence especially if the loss will be speculative. http://www.ussc.gov/Legal/Primers/Primer_Loss.pdf In the eyes of the Sentencing Commission stacking puts you in the express lane to Leavenworth. One other consideration for the Chui brothers is whether they are naturalized citizens. If they are naturalized and committed any part of this before becoming naturalized then they are subject to being stripped of their citizenship and deported under the Demjanjuk rule.http://articles.cnn.com/2002-02-21/justice/demjanjuk.citizenship... If they are here on H1B visas or other work permits they will be deported as soon as their sentence is over.

Sorry I can't give you a clear answer to your hypothetical but there isn't one right now.

Just found the DOJ policy manual for this. Educational http://www.justice.gov/criminal/cybercrime/docs/ccmanual.pdf

I've stopped reading your posts and just greening them. Pretty obvious when somebody probably knows what they're talking about.

nsdp said:   BarryAndLevon said:   nsdp said:   
I buy $10k of coins at the Mint and get $500 back on my credit card and deposit the coins into my bank account without waiting the time period for long term capital gains then I have a short term gain of $500 that I have to pay taxes on. You can't call it an investment when you have a $0 cost basis. Or if you have business expense and write off the whole expense you have an offsetting income to be reported. Other twist is you get 100% of the expense reimbursed by your employer, then you have reportable income. If you buy diapers for your baby (nondeductable) then no income tax.

Can you elaborate a bit--Why is it that if I buy a $10,000 stero system, the $500 is a rebate, but if I buy $10,000 of money, the $500 is a capital gain?

What is happening is you keep the stereo(tangible asset) and have a $500 reduction in your price basis. If you get money and either spend it or redeposit it in your account within 6 months you have a monetary cash short term gain of $500. real simple. Hold the coins for more than 6 months then you have along term capital gain. The only similar transaction of real goods would be you buy a FAR item at Fry's say and then get a 5% Cash Back from your credit card. The 5% is taxable because you have 0 basis for the software you bought.

Judge John Minor Wisdom once said in one of his opinions that anything you get is income unless the tax code says it isn't. He is one of the very few Circuit Court of Appeals judges you can cite to the Supreme Court and not get bounced out on your ear.

But these coins aren't going to change in value. They aren't collectibles, so holding onto them doesn't provide any tax benefit. I believe you would have to recognize it as $500 cash as soon as you took delivery. The actual act of depositing money into a bank account shouldn't have any bearing on your taxes.

nsdp said:    If they are naturalized and committed any part of this before becoming naturalized then they are subject to being stripped of their citizenship and deported under the Demjanjuk rule.http://articles.cnn.com/2002-02-21/justice/demjanjuk.citizenship... If they are here on H1B visas or other work permits they will be deported as soon as their sentence is over.

Sorry I can't give you a clear answer to your hypothetical but there isn't one right now.

Just found the DOJ policy manual for this. Educational http://www.justice.gov/criminal/cybercrime/docs/ccmanual.pdf

I like how you fulfill your Padilla duty and they're not even your clients.

nycll said:   dshibb said:   dshibb said:   nycll said:   ^for 20 million gains,
Not violating t and c, legal
Unknowingly violates t and c, cival matter
Knowingly violates t and c, fraud.

So anytime I knowingly violate a contract from here on out I have committed criminal fraud?

????You have to knowingly gain, the "victim" has to unknowingly (before your act is discovered) lose something. In other words, there needs to be deception, which your coupon stacking example with violation of T&C certainly is. The monetary amount has to be material, which 20 million certainly is.

Your gain can be substituted of the loss or the "victim" under the latest revision of the sentencing guidelines> The same instructions are used for tax fraud as well. See page 11 http://www.ussc.gov/Legal/Primers/Primer_Loss.pdf

DaveHanson said:   nycll said:   To see the deception is to ask the question if they could be intentionally trying to buy all the merchandize?

Certainly they could be. Indeed, my understanding is that that's what they *did* do before they were banned. AFAIK the reason they targeted Nordstrom's in the first place is because of their no-questions-asked return policy, combined with their sloppy accounting that didn't refund CB when a .com item is returned to a B&M store. I think the truth is that while they preferred that the items not ship, they didn't much care either way. If they started shipping again, then they'd just return them to the B&M store.

Posters are right that the $23 million figure isn't irrelevant. My issue is with *why* it's relevant. It helps establish that the purpose of these transactions was to earn Cash Back (whether or not the merchanise actually shipped). But they didnt order $23-million worth of merchandise. That's the total of the canceled orders over 2 years (or 3 years, depending on what dates you believe). Had the first order for a few thousand dollars been fulfilled, there's no way to know how much they would've continued to order over the next 3 years. I admit it technically isnt specified, but I think it's safe to assume they did not submit $23-million worth of orders concurrently.

A while back, AMEX decided they couldnt verify my address and started canceling my gift card orders. For about a year, I tried to order $5k worth every month to see if they'd finally fixed the problem - did I try to order $60k worth of GCs, or try to order $5k of GCs 12 times? This is why that $23-million amount is irrelevant, unless they did all their volume in one shot.