How is gold taxed - when you sell it?

JoshL

If I buy gold at $800 and sell it for $1000 - how does the government know what I paid either way? Is it up to me to keep all receipts of purchase and sale? How is gold taxed when you sell it?

Thanks

MoneyLA

the capital gains tax rate does NOT apply to gold. you pay your normal tax rate.

like our entire tax system, which is "voluntary," you must honestly report your buy and sell prices.

JoshL

<< <i>the capital gains tax rate does NOT apply to gold. you pay your normal tax rate.

like our entire tax system, which is "voluntary," you must honestly report your buy and sell prices. >>



Someone posted (a long time ago) that coin shops are required to report sales (to them) of over X number of ounces. Not sure that is true or not.

Maybe someone knows?

Yes, best to keep it honest. Not worth the trouble, otherwise.

storm888

<< <i>If I buy gold at $800 and sell it for $1000 - how does the government know what I paid either way? Is it up to me to keep all receipts of purchase and sale? How is gold taxed when you sell it?

Thanks >>




///////////////////////////////

You would owe tax on capital gains of $200.

Save your receipts.

Long-term or short-term rates would apply based on the
published variables.



galt


groco

storm888

Calculating Capital Gains Tax on the Sale of a Collectible

Uncle Sam takes a tax bite out of almost every asset sold and collectibles are no exception. Indeed, collectibles are currently subject to one of the highest rates of federal taxation on investment property. Capital gain from the sale of a collectible is taxed at 28 percent.

What is a collectible?

What is a "collectible?" Of course, collectibles include stamps and coins, fine wines, glassware, and other commonly collected items.

It’s important to keep in mind that less obvious items are often "collectibles." For example, a collection of political campaign buttons and badges can be a collectible. If an item is an antique, it is probably a collectible.

Higher tax rate

Traditionally, collectibles have been taxed at a high capital gains rate because of public policy arguments. Supporters of high capital gains tax rates for collectibles justify their position by the lack of broader benefits, such as innovation, new products and higher productivity, that society receives from collectibles. On the other hand, society benefits from the preservation of works of art, antiques and many other collectibles.

Currently, the capital gains tax rate for collectibles is 28 percent. This is significantly higher than the capital gains tax rate for stocks, securities and many other investments, which enjoy a 15 percent capital gains tax rate (five percent for taxpayers in the 10 or 15 percent tax brackets).

Understanding basis

Before you calculate gain, you have to have an understanding of basis. If you purchased the item, then your calculations start with the cost of acquisition. These costs include not only what you actually paid for the collectible but also auction and broker’s fees.

Inherited collectibles are treated differently. Your basis is the collectible’s fair market value at the time of inheritance. Most commonly, fair market value is determined by an appraisal but there are other methods. Another way to show fair market value is by looking at current sales of comparable collectibles.

Your collectible may have been a gift from another person. In this case, your basis is the same as that of the person who made the gift.

Many collectibles require special care. You may have spent money to maintain the collectible or restore it. These costs are also part of your basis in the collectible.

After you have calculated your basis in the collectible, you subtract your basis from the amount you sold the item for. This is your capital gain.

Example. Beverly inherits a 19th century rocking chair from her grandmother. Shortly before she died, Beverly’s grandmother had the chair appraised. Its value was determined to be $2,000. Beverly spends $500 to restore the chair. Two years later, Beverly sells the chair online. Beverly earns $3,900 from the sale. Beverly’s basis in the chair is ($2,500) ($2,000, which was the chair’s fair market value when she inherited it, plus the $500 she spent to restore it). Beverly’s capital gain is $1,400 ($3,900 minus $2,500). As a collectible, it is taxed at 28 percent rather than 15 percent, a difference of $182 in tax.

"Gold bug" advice

The price of gold has almost doubled in the past several years. Investing in gold presents two issues. First, there is the issue of valuing gold coins. When coins have numismatic worth exceeding their face denomination, the amount realized is the numismatic value of the coins, not the face value. Second, if you want to invest in the price of gold rather than in the collectible nature of a gold coin, you should consider investing in gold strictly as a precious metal, such as through gold-mining stocks. That interest, and the gain realized by selling it, is entitled to full capital gain treatment. Do keep in mind however that mutual funds (such as the now defunct US Gold Trust) which buy and sell gold for their shareholders, exchange-traded funds (such as GLD and IAU) which buy and sell gold for their shareholders, and direct purchases of gold bullion and/or gold futures, are considered collectibles! The same applies to silver and other precious metals and gemstones.


groco

JoshL

<< <i>the capital gains tax rate does NOT apply to gold. you pay your normal tax rate.

like our entire tax system, which is "voluntary," you must honestly report your buy and sell prices. >>



Others are saying, and it appears that it is true, that you do have to pay capital gains tax.

storm888

<< <i>

<< <i>the capital gains tax rate does NOT apply to gold. you pay your normal tax rate.

like our entire tax system, which is "voluntary," you must honestly report your buy and sell prices. >>



Others are saying, and it appears that it is true, that you do have to pay capital gains tax. >>



/////////////////////////////////

I think what lamoney said was the gain is taxed at your nominal rate; the
rate at which your "ordinary income" is taxed.

That is correct, under some circumstances.


It is sort of a distinction without much of a difference. The tax guys
still want you to report your profits and pay tax on them. Whether
we call it "capital gains tax" or "income tax," they still hope you will
volunteer to pay.

It is all voluntary, but folks who don't volunteer get into trouble.

JoshL

<< <i>

<< <i>

<< <i>the capital gains tax rate does NOT apply to gold. you pay your normal tax rate.

like our entire tax system, which is "voluntary," you must honestly report your buy and sell prices. >>



Others are saying, and it appears that it is true, that you do have to pay capital gains tax. >>



/////////////////////////////////

I think what lamoney said was the gain is taxed at your nominal rate; the
rate at which your "ordinary income" is taxed.

That is correct, under some circumstances. >>



I was talking about gold bullion. Just to be clear. Not coins or otherwise. Just simple 1 ounce bullion.

Thanks

storm888

From

climbfinance.com


Nov

Taxation of GLD (Gold Bullion) vs. Gold Minersin ETFs, Taxation

This post was originally made on April 24, 2006 on a former blog of mine.

The last year has seen a price run-up in gold of epic proportions (2008 note: the run continues!). In times like these I am frequently asked whether or not one should invest the gold miners or in the physical bullion. Fact is, up until a year or so ago the answer was easy. Buying and storing significant amounts of bullion was cost prohibitive and thus the easy way to play gold was to buy shares in the miners. That all changed with the gold ETFs that have become available recently. Now anyone can buy the miners or the bullion on an exchange with relatively similar costs.

As a financial planner one always needs to be mindful of the impact of taxes. In that regard there is a little known difference between the taxation of a share in a gold mining stock and the taxation of a share in say the GLD ETF for instance.

In the United States the ownership of physical gold is considered the ownership of a collectible. The ownership of a share of GLD is considered the ownership of gold and therefore also treated as if you own a collectible. So why does that matter? Because the long term capital gains tax rate on collectibles is 28% and NOT the more favorable 15% afforded to capital gains on stocks.

According to the IRS a collectible “means and includes any work of art, any rug or antique, any metal or gem, any stamp or coin and any alcoholic beverage.”

The GLD Prospectus points this out on page 23:

"Under current law, gains recognized by individuals from the sale of ”collectibles,” including gold bullion, held for more than one year are taxed at a maximum rate of 28%, rather than the 15% rate applicable to most other long-term capital gains. For these purposes, gain recognized by an individual upon the sale of an interest in a trust that holds collectibles is treated as gain recognized on the sale of collectibles, to the extent that the gain is attributable to unrealized appreciation in value of the collectibles held by the trust. Therefore, any gain recognized by an individual US Shareholder attributable to a sale of Shares held for more than one year, or attributable to the Trust’s sale of any gold bullion which the Shareholder is treated (through its ownership of Shares) as having held for more than one year, generally will be taxed at a maximum rate of 28%. The tax rates for capital gains recognized upon the sale of assets held by an individual US Shareholder for one year or less or by a taxpayer other than an individual US taxpayer are generally the same as those at which ordinary income is taxed."

2008 Note: other ETFs that hold collectible metals are also taxed this way, namely the Silver, SLV ETF.

JoshL

What a scam. One goes out and buys an ounce of gold and then wants to sell it. Doing all the work. What right does the government have to tax it at absurd rates. Another taxation scam. As bad as the death tax.

Deadhorse

<< <i>

<< <i>the capital gains tax rate does NOT apply to gold. you pay your normal tax rate.

like our entire tax system, which is "voluntary," you must honestly report your buy and sell prices. >>



Others are saying, and it appears that it is true, that you do have to pay capital gains tax. >>




Indeed.

You pay the 28% on the capital gain. You pay that on paper metals as well. They aren't looked at as stock.

No like for like transactions if converting from paper to physical metal. They get you coming and going.

You can include storage costs and other costs when figuring your cost to deduce the amount of gains.

OTOH, MoneyLA is correct that taxes are voluntary. Proceed at your own risk.

Coin shops are required under the Patriot Acts to report sales and purchases of precious metals. Any cash transactions of $10,000 or more and any gold transactions of 25 or more ounces regardless of payment method. However, US Gold Eagles, Maple leafs and Philharmonics are exempt from reporting.

Not sure on silver transactions, I used to have it around here. I believe it is any single transaction of $10,000 or more, but it may be $25,000 or more regardless of payment. One is required to produce a valid driver's license and your SS# as well as a valid address.

Know your shop, break down the sales into smaller units for paperwork and you are fine.

Wholesalers are exempt from this as well and sales to shops are not required to be reported.

If you are incorporated as a precious metals dealer, you are also exempt when dealing with other businesses.

Just file your taxes normally. If you sell these amounts or more to a single idividual, you are required to report it.

Again, break it down to smaller units and no need to report anything.

I incorporated as a PM dealer several years ago, the tax advantages are in your favor. Any and every expense can be taken, vehicle, home office and equipment, gas, postage, everything associated with the business. It has been well worth it over the years. That 28% can be reduced to well under 15% if you are creative and stay legal. There are many loopholes in this legislation. It was hastily written.

I really doubt terrorists are going to be in the US transfering gold or silver bullion to cash. Hard to get it into the country like that.

It's just another way to monitor and try to control US citizens in my opinon.

I really doubt that many such transactions are looked into individually, never heard of one yet. They will just compare it to your tax return.

There was a case in Houston a few years ago when a fellow wanted to sell 100 onces of K-Rands with no paperwork. Silent alarm time.

The police took him into custody in the shop.

He hired a lawyer and got his gold back after satisfying Homeland security, but he did get hammered on the taxes. Two checks were written, one to him and 28% to the Homeland officers. He was lucky, his K-Rands could have been confiscated as american citizens are not technically allowed to own 25 ouces of gold not exempt as noted above.

I had am older man, a friemd of my Moher and Stepfather who wanted to sell me 600 one ounce K-rands at a discount. He had already served time on an IRS fraud chage in the past. He just wasn't willing to to take the proper discount and wanted cash, I won't travel accross country with that sort of cash, even with a gun in the shoulder holster. For all I knew he had several people in ambush and his barns were out in the sticks in the midwest. I did offer to buy the total lot in samller amounts over time via bank wires but he was in too much of a rush to trust the deal. He embezzeled quite a bit and had several barns out in the middle of nowhere stuffed with pure number one Copper bars and 1,000 ounce bars of silver. I'm sure had had more K-Rands.

I have no idea what ever became of him, but it was just too risky and he was in too much of a hurry. I could have bought it all over several months, but he was afraind of it taking too long. He felt he was under survalence. He may have been, but I could have bought his stash via bank wires and cashiers checks. He had to have cash. I backed off after spending to much time with him via emial and phone calls. He was a real anti-governmet activist, even at his age in the eighties.

I realy wanted to, but something told me I needed to avoid this guy. Even the promise of a huge profit wasn't worth it.