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Do I have a legal/moral obligation to alert local police that this man may posses a stolen firearm? I have no proof nor any reason to suspect this man stole the weapon, but he got it in a trade, and I don't know what he did to verify its legitimacy.
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Just because the seller doesn't want to engage in a terribly inconvenient and insulting process doesn't mean he's up to no good.
You have no "moral" or legal obligation to call the cops on him for refusing the transaction, and it seems odd that you'd be willing to set those concerns aside for a lower price.