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    Investment Newsletter

    An Investments Newsletter I receive contained the following statement that astounded me.

    "... that the gold ETF is taxed as a collectible – that is, at twice the capital gains rate of a regular equity holding (28% vs. 15%)."

    Is this guy smokin dope or what? For one thing I am aware of at least two Gold ETFs. Thing is my Dad trades in one of them and unless my tax software is doing it automatically with no help from me, he's paying normal capital gains rates on his sales. Or is the guy talking about taxes at the Fund Level? They would of course be included in the fees an investor pays but have no bearing on the investor's capital gains tax.
    Last edited by erchess; 10-07-2010, 06:44 PM.

    #2
    Wouldn't you have to mark it as a collectible? Howz your software know its a gold sale?

    Comment


      #3
      My Two Cents

      It is a collectible only if it is an artifact.

      Investment in gold stocks, or gold mutual funds, are subject to same capital gains as anything else.

      Comment


        #4
        Look up ETF

        First of all I didn't know what "ETF was" so I had to look that up on "google"
        Then once getting there,
        it seems that the Investment Advisory could be correct.

        Something about "the ETF owns gold" so therefore it is considered to be a collectible and then is taxed at the higher captial gains rate. Another site I found states that the issue is that gold and silver fall under the heading of "collectibles" in the eyes of the IRS, so therefore don't qualify for the 15% cap gains.

        I would like more info on this subject - just don't have the time now with the last week of the filing season and working on extensions. So maybe one of our learned colleagues can provide us with more in depth info.

        Sandy

        Comment


          #5
          collectible fund

          I have no idea how it would know although I do use the ticker sympl for Securities. Still I agree its unlikely the software has pecuiliarities of different securities programmed in. I also dont see how a secuirity can be a collectible but then not every provision of the tax laws in this country is in line with common sense.

          Comment


            #6
            Fund says that 28% is correct

            At least for the iShares Gold Trust (IAU), the 28% is correct. Their prospectus ( http://us.ishares.com/content/stream...pplication/pdf ) makes clear that the "shares" represent a partial beneficial interest in the underlying asset (gold). Page 33 of the prospectus specifically notes that the 28% collectible rate applies to long-term sales by "share" owners.

            Comment


              #7
              Exchange traded funds

              Although I have so far had no experience with "gold" ETFs, I have dealt with several similar ETFs.

              In most cases (and definitely in the grantor trust mentioned previously) the shareowner receives a Sch K-1, which with its many entries and codes makes the tax preparation reasonably clear. If your software is up to par, most of the work is done by merely entering the correct amount on the proper line of the Sch K-1 worksheet.

              The greatest problem I have encountered is the client provides me with the Forms 1099 from the brokerage account, and just does not realize the K-1s are separate. I've had a couple of "guess what came in the mail today?!?" (late March/early April) telephone calls from such clients.

              As a positive, the K-1s are frequently available online from the fund manager albeit normally late in the tax season. The tax person just needs to have a higher level of awareness for the investor who might own these funds. When in doubt, look at the year-end statement and see if any "extra" income appears in that summary.

              FE

              Comment


                #8
                Perhaps the software didn't apply the 28% rate because the individual's marginal rate was less? If they were in, say the 15%, then the collectible would be at 15% (rather than 0% this past year) and it might slip your notice.

                Comment


                  #9
                  Taxpayer

                  had a down year so agi was just a hair under 100K. Very unusual year for this guy who normally makes a ton in the market.

                  Comment


                    #10
                    28%

                    I'm not aware of any provisions that allows for collectibles to be taxed at 15%. IRC §1(h)(4) and (5) seem pretty clear. The ETF is an undivided interest. It would be different if you owned shares of a company that conducts business in gold, such as a mining company. But if you own a part of a pile of gold then you have a collectible.

                    No, our software would not know what the capital assets was unless we told it. That's what preparers are for.....
                    Richard Ogg, EA
                    The Master's Tax & Financial Services
                    www.TMTFS.com

                    Comment


                      #11
                      The IRS considers a Gold ETF a collectible for tax purposes but it doesn't consider it a collectible when deciding whether it can be put into an IRA. It's a sort of "We've changed our mind" tax decision.

                      Certain closed end funds investing in precious metals (gold) are taxed at the lower rate. You really need to do some research when deciding.

                      Comment


                        #12
                        Collectible gold???

                        A gold coin or a work of art is collectible, but I don't think a gold bar would necessarily be considered a collectible. There are gold, silver, base metal, agriculture product ETFs. I would consider them to be commodity ETFs, not collectible ETFs.

                        I don't know of any ETF that invests in rare coins or Mona Lisas.

                        Comment


                          #13
                          emailing this to irs laison

                          Originally posted by erchess View Post
                          An Investments Newsletter I receive contained the following statement that astounded me.

                          "... that the gold ETF is taxed as a collectible – that is, at twice the capital gains rate of a regular equity holding (28% vs. 15%)."

                          Is this guy smokin dope or what? For one thing I am aware of at least two Gold ETFs. Thing is my Dad trades in one of them and unless my tax software is doing it automatically with no help from me, he's paying normal capital gains rates on his sales. Or is the guy talking about taxes at the Fund Level? They would of course be included in the fees an investor pays but have no bearing on the investor's capital gains tax.
                          I am emailing your question to my IRS laison. Also, Cramer and Suzie Orman suggest one invest 20% in gold. If it is held in a Roth IRA it is ok, but would there be a problem with an IRA?

                          Comment


                            #14
                            From the iShares Silver Trust Website (SLV)

                            Maximum 28% Long-Term Capital Gains Tax Rate for U.S. Shareholders Who Are Individuals

                            Under current law, gains recognized by individuals from the sale of “collectibles,” including silver, held for more than one year are taxed at a maximum rate of 28%, rather than the current 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 U.S. Shareholder attributable to a sale of iShares held for more than one year, or attributable to the trust’s sale of any silver which the Shareholder is treated (through its ownership of iShares) 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 U.S. Shareholder for one year or less or by a taxpayer other than an individual United States taxpayer are generally the same as those at which ordinary
                            income is taxed.

                            Comment


                              #15
                              Last year I had a 1099 from a brokerage firm which had a 28% gain on that line. When I inquired what it was for, he didn't know, and had to call the mutual fund. Turns out they sold some gold bullion within the fund which they had as a hedge. I imagine there will be a lot of this next year, as gold is popular right now.

                              Comment

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