Gold Investors Can Take Advantage Of This Tax Loophole (GLD)

fine gold bars

From Grant Wasylik: Attention all Gold Bugs and Silverites.

I have a year-end tax trick that can help you turn a precious-metals loss into immediate tax savings, without – technically – losing possession of the metals.

It’s a loophole under the “wash-sale rule” Section 1091 of the Internal Revenue Code.

The IRS defines a wash-sale as:

“a sale of stock or securities at a loss within 30 days before or after you buy or acquire in a fully taxable trade, or acquire a contract or option to buy, substantially identical stock or securities.”

The rule aims to prevent investors from generating and recognizing artificial losses in situations where they do not intend to reduce their holdings in the securities that are sold.

So, if you want to claim a loss on the sale of a security (like a stock, bond, option, fund, etc.), you must wait 31 days to repurchase it or a “substantially identical” security.

However, a tax loophole exists for precious metals – bullion coins and bars – because the rule doesn’t mention “precious metals.” That means they’re not subject to a holding period for tax-swap sales.

If you’re sitting on losses on bullion coins, numismatic coins or plain old bullion bars, this tax move allows you to realize these losses without losing possession of your metal.

Here’s an example of how it works:

Let’s say you bought a MS 64 $20 Saint-Gaudens gold coin(s) for $2,200-per-troy-ounce back in 2010 …

Today, you can go to a trusted coin dealer … sell your coin(s) at current market price (around $1,250-per-ounce) … and then immediately buy them back for the same price.

Through a transaction like this, you would realize a taxable loss of $950-per-coin (which will lower your 2017 tax bill), but you still keep your coin(s).

Now, there is a fee for the transaction. So, you’ll want to make sure it’s less than your tax advantages.

Interested in exploring a precious-metals tax swap?

Follow these steps:

1. Consult your accountant or tax adviser before executing a tax swap. Tell him or her what you’re contemplating. Could you use some losses to offset gains on a one-for-one basis? There’s a chance even a CPA may not know this avenue exists.

By the way, if you don’t use up all your losses, they’re not lost. You can roll them forward into future tax years. And if you don’t have an offsetting gain, you can still take up to a $3,000 loss in the current year.

2. Call Asset Strategies International’s (ASI) preferred-client relations team at (800) 831-0007. (Weiss Research receives no kickback from recommending these experts.) They’ll actually walk you through the calculations to help you decide if the coin swap makes sense. Or consult your own trusted coin dealer instead.

Before you call, be sure to know what type of merchandise you have … the quantity … the price you paid for it … and your tax bracket.

If you’re ready to conduct a “tax swap” after talking to your tax consultant and ASI, here’s a preview of what comes next. (ASI will guide you through the process over the phone, as well.) …

  • You’ll have to physically mail your coin(s) to ASI. Note: You could use another coin dealer if you prefer. ASI is one of our favorites. Not only is the company’s reputation top-notch, but ASI has been executing successful tax swaps for clients for over three decades.
  • ASI can “fix” the price. Meaning it can immediately arrange a buy-and-sell order on the same day. They must talk to you to do so.
  • If coin values spike in transit, you can have ASI mail the coin(s) back to you. No harm, no foul.
  • Transaction fees: On numismatics, it’s 4%, plus the shipping costs. (This is a large discount to the average 8%-10% fee on a buy-and-sell transaction.) On bullion, as in bars or coins, it’s only 2%, plus the shipping costs. You’ll have to cut a check to ASI to complete this process. But, you’ll be able to determine if it’s worth it by talking to both your tax consultant and ASI.

I talked to ASI’s president and COO, Rich Checkan, the other day.

Rich told me:

“Now is a particularly good time to consider this strategy. Gold is roughly three-times closer to its recent lows than it is to its all-time highs. Silver is nearly nine-times closer to its recent lows.

Why is that important?

Simple …

The lower the price when you execute a tax swap, the bigger the tax advantage and the smaller the cost to capture it.

And, if you act quickly, you should be able to put this to work for you this tax year.”

This clever tax move allows you to benefit from falling precious metals prices (in the past or in the future), while not technically losing possession of your metals.

Sounds almost too good to be true… But it’s not.

The SPDR Gold Trust ETF (GLD) rose $0.24 (+0.2%) in premarket trading Thursday. Year-to-date, GLD has gained 11.00%, versus a 15.46% rise in the benchmark S&P 500 index during the same period.

GLD currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 35 ETFs in the Precious Metals ETFs category.


This article is brought to you courtesy of Money And Markets.