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March 22nd, 2007
10:47 pm


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why, Rabbis, why do you do this?
I received my copy of the Washington Jewish Week (also known as the "weaklyweekly Jewish"), and there was an advertisement in it for a local synagogue's free Passover Seder. That's awesome: I support doing this wholeheartedly, and I commend everyone who has anything to do with it.

However, there is an unpleasantness which has spread through multiple places. On the back of that flyer is a "Sale of Chametz" form, which includes the following text:
Be it proclaimed that I hereby empower and authorize Rabbi (redacted) to sell all chametz that may be in my possession, wherever it may be — at home, a place of business or elsewhere. This includes all goods which may be delivered to me over Passover as well as stocks owned in full or in part in corporations which sell stocks owned in full or in part in corporations which sell or deal with chametz. The Rabbi has full right to sell, dispose, and conduct all transactions, including rental of the place where the chametz is stored and rental of right of way as he deems fit and proper, for such time which he believes necessary in accordance with detailed terms and details forms explained in the contracts in their possession. The above power hereby being given, is meant to conform with all Torah and Rabbinic regulations and laws, and also in accordance with the laws of Washington, D.C.
(emphasis added)

Now, that's not the only place which has this type of verbage: HIR in New York has a remarkably similar bit, as does the Conservative synagogue Temple Beth El.

I have a couple of problems with this form, which I brought to the attenton of the Rabbi in question last year (and was blown off):

1) Sale of stock is a taxable event. The IRS is pretty clear about that (for instance, see IRS Publication 550, specifically "multiple party sales or trades" and what is a sale or trade?). Having a contract which specifies that a taxable event will likely occur, without either showing why it will not, or providing provision for addressing possible liabilities which will be incurred is not responsible.

Examples of possible problems include: Ploni sells his "chametz stock" to the Gentile named "Chris." During the week of Passover, the stock splits. Assuming that the sale is cancelled after Passover ends, are all of the shares returned to Ploni, or only the same number of shares which he had before the sale? Does Chris get the benefit of the split (and get to keep half of the shares)? Assuming that Chris gives back all of the shares, what is Ploni's new basis?

2) A corporation which "sells or deals with chametz" could be a shoe store which has a vending machine with a bag of pretzels in it. Or an investment banking firm which brings in doughnuts to a meeting. Effectively, that statement means "all corporations which do not themselves observe Passover and divest themselves of all Chametz." So by this argument, all ownership of any Gentile corporation or partnership is removed during Passover.

So what about the interest earned by funds in credit union or money market accounts? Who gets that: Ploni or Chris?

3) Given the above, and the halakha that any hametz owned by a Jew on Passover is forbidden to all Jews forever, would that mean that it would not be permitted to buy stocks from Jews who did not previously "sell" their ownership in these companies over Passover? That seems thorny to me...

4) The District of Colombia Offical Code, § 31-5602.01. Licensing of broker-dealer and agent, includes the following statement:
(a) No person shall transact business in the District of Columbia ("District") as a broker-dealer or agent unless the person is licensed or exempt from licensure under this chapter.

So I certainly hope that the Rabbis in question are licensed broker-dealer/agents in their respective jurisdictions: if they're not, that looks like a problem to me (mind you, I'm not a lawyer, but I've hung around them too much...)

5) all goods which may be delivered to me over Passover is an odd phrasing to me: so if someone prank-ordered a pizza to be delivered to Ploni's house, that pizza would suddenly belong to Chris? Would Ploni be obligated to ensure that Chris was notified of the arrival of the Pizza (and for that matter, ensure that it was delivered to him in a timely matter after the fashion of the mitzvah of returning lost objects?)

So it should seem pretty clear that this is a hornet's nest - one way out of it is to say "well, it's not a real sale," which of course causes the problem that any actual hametz which is sold would still, then be well and truly owned by the Jew, and thus would be prohibited forever.

I am against anything which makes the sale of hametz any less "real" - I DO give a key to the Gentile in question, and if he happens to want to come take a bottle of scotch, that's excellent, and I'd be thrilled (although I'd rather that he drank it outside...).

Before I get any flack about slamming someone without giving them a chance to defend themselves, I did point these problems out to the Rabbi in question last year, and was directed to read an article on the subject by Rav Asher Meir. But that includes this paragraph:
Rav Sternbuch expresses worry that such a sale may not be valid according to securities laws. While it is true that these laws require registration of every sale of securities, an expert I spoke to confirmed that failure to report does NOT void the sale, so that it seems this worry is unfounded. (This question recalls the famous dispute between the Chatam Sofer and the Barukh Taam - Rav Barukh Frenkel - regarding the "stempel" or tax stamp. Rav Frenkel was concerned that the sale of chametz was void since no tax stamp was placed on the liquor. But the Chatam Sofer (I:113) explained that this did not mean that the Kaiser failed to recognize the validity of the sale, merely that he was willing to exempt this particular sale from the stamp.)

The difference is obvious: The SEC and IRS are not the Kaiser, and unless there's a specific exemption (I'm not aware of one), this sale would still be a taxable event (that is, if it's a valid sale - if it's not a valid sale, then it wouldn't be taxable, but the issue would be moot).

I pointed out that the article did not address the above issues, but never received a response of substance.

I sure wish that we could tighten this up: if one is going to hold that securities are subject to the prohibitions of Passover, then we need to write contracts which are properly-formed US law contracts. Of course, the implications of holding by an opinion of that nature are terribly punishing, so I wouldn't advise it (it ends up being more like holding by the various opinions which describe Christianity as non-monotheistic, and thus it becomes prohibited to do business with Christians within three days of their holidays... like Sunday... yeah, you can see how those opinions only came from regions of the world where there were very few Christians...)

I'm certain the Rabbis who are using these forms are sincere, but they're obviously mistaken (hey, everyone's human...) Hopefully this mistake gets corrected before it causes any serious trouble.

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(2 comments | Leave a comment)

Date:March 23rd, 2007 11:40 am (UTC)
Very well written, indeed. ;o)
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Date:March 23rd, 2007 01:01 pm (UTC)
Thank you :)
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