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Who Foots Bill for Counterfeit Cash?

November 05, 1995|CARLA LAZZARESCHI

Q: Last week I gave a cafeteria cashier a $20 bill, and she marked it with a pen before putting it in the cash register. She explained that the ink from the pen would have turned dark if the bill had been counterfeit. Fortunately, my bill passed muster. But what would have happened if someone had given me a bogus bill and I tried to spend it? Could I have been prosecuted? Would I have been given the money back or would it have been confiscated? It sure seems possible that people could get caught through no fault of their own. --V.W.


A: You're absolutely right in noting that innocent people can get caught holding bad money. What happens to you when this occurs depends on whether the situation is played according to the book, or, more likely, according to expediency.

The Secret Service, which is responsible for protecting our currency, advises shopkeepers and other merchants to confiscate all bills they know to be counterfeit and to notify both the local police and the Secret Service of the situation, regardless of the severity of the case. At this point, if all goes according to the book, you might be contacted by either a police officer or Secret Service agent.

For the Record:
Los Angeles Times Sunday November 19, 1995 Home Edition Business Part D Page 5 Financial Desk 5 inches; 160 words Type of Material: Correction
The answer in the Nov. 5 column regarding a consumer's liability for a check forged on his account overstated the consumer's responsibility. In general, an innocent victim of a check forgery is not held responsible for the funds illegally drawn on the account. Whether the bank suffers the loss or forces the loss back on the merchant or institution that accepted the check depends on the facts of each case.
In cases when the bank catches the forgery prior to processing the check for payment, the check is returned to the merchant or to whomever the check was written. In cases where the bank doesn't catch the forgery and clears the check, the bank often--but not always--suffers the loss. It depends on the circumstances.
That said, it is important to note that recent laws and escalating attempts by banks to make consumers more responsible for lost checks are combining to erode the relative insulation consumers once had in the face of forged checks. Banks want you to notify them immediately if you have lost a check, if your checkbook has been stolen or if you believe your mail has been opened and you fear your checks could have been stolen or copied.

This doesn't mean that you will be charged with any crime; in fact, the Secret Service acknowledges that the majority of bogus bills are held unknowingly by citizens who are as much a victim of the counterfeiter as anyone.

The real pain comes when you realize that you will not be compensated for any counterfeit currency confiscated from you. It's simply your loss. Merchants consider it a cost of doing business; individual taxpayers may treat it as a theft loss, which is tax deductible to the extent that each occurrance exceeds $100. If the counterfeit money is given to you as part of your payment of wages, and then confiscated and not replaced, you should be sure to deduct the confiscated amount on on line 21 (other income) of the 1040 tax form. (If you do deduct your losses, be sure to get verification for your records; you wouldn't want to face a hassle from the Internal Revenue Service on top of all this.)

If that's how it's supposed to be handled, now let's discuss what's more likely to occur. If the ink on the bill you submitted to your cafeteria cashier had revealed the bill to be bogus, she would probably have returned it to you and asked for another bill.

Now you have the bad money back. What do you do?

You're supposed to turn it in to either law enforcement or banking authorities and explain how and where you got the bill, assuming you even know. More likely? You will simply try to spend it somewhere else, hoping the ink mark isn't noticed. As you can see, this is like like those childhood "pass the ball" games where the object was not to be the person holding the ball when the whistle blew.

However, now that you know you hold a bogus bill, the real penalties for attempting to spend it kick in. In the eyes of the law, you are no longer an innocent victim. Victim, yes; but not innocent if you attempt to pass the bill. And the penalties for conviction--as much as 15 years in prison and a $10,000 fine--are not inconsiderable.

Will Addendum Aids Value of Property

Q: Several years ago you mentioned attaching an addendum to your will noting that property held by spouses as joint tenants was actually purchased with community property funds. You said this would ensure that the asset would be treated to a full step up in value upon the death of one spouse. What is the wording of that statement? Does it really work? --J.M.


A: Although there is still some debate among the legal community as to whether this statement is valid, many attorneys advise their clients that they can take advantage of the best of both community property and joint tenancy systems of holding property. Remember, under joint tenancy, the probate process is avoided, while community property vesting allows a step up in value for the property held by the surviving spouse.

The following statement was drafted by Marvin Goodson of the Los Angeles law firm of Goodson and Wachtel: "We hereby agree that all of the property we hold in joint tenancy is truly and completely community property and we are holding it in joint tenancy for convenience only. We do not intend to change the character of the ownership of the property by holding in in joint tenancy."

Goodson recommends that married couples sign and date the statement, preferably before a witness, and file it with their wills. Goodson says the solution has been upheld in IRS Ruling 87-98.

Account Holder Pays for Lost, Stolen Checks

Q: What happens when you lose a blank check, or one is stolen from you, and then someone actually writes and passes that check? Who's liable: the institution that accepted the check or the account holder? G.W.B.


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