Actually, getting back to my earlier post, if the IRS went to court without proof that I had taxable interest income from bearer bonds, it would never make it to an actual trial. Such a case would be killed at the Grand Jury level. They couldn't just say, "Well, we really find his situation suspicious," or "we're certain he's making taxable interest income." They'd have to say to a Grand Jury, "Mr. West was in possession bonds numbered 1X494BB21494 - 1x494BB21621, each valued at $20,000, and each drawing interest for the last 18 months." And then, they'd have to show them the bonds and an interest statement from the bank showing that the bonds generated income (grin). If they couldn't show them the bonds and proof of interest accrual, they've proven nothing ... since the interest income accrues on the bond, not the bearer (who could have cashed in or given away some of those bonds to other people who would NOW be the tax-responsible parties).
FWIW, making the buying and selling of bearer bonds illegal in the USA was just a feel-good law. I'd speculate that most of the wealthiest people in the world have a lot of their liquid assets in interest-bearing numbered securities ... and probably spread around among different banks and in different countries (and drawn on different currencies). For the IRS, this is probably their worst possible nightmare ... and one they'd just as soon not talk about.
Just my personal opinion ... but I believe this country should abandon all income taxes and go to a system that taxes consumption. And though wealth taxes don't exist in the Federal realm (yet), they do exist at the state level (eg., property tax) ... and I also think THOSE taxes should be replaced with consumption-based taxes.
Regards - J. Alec West