Tax obligations for the sale of precious metals do not expire at the time the sale takes place. Instead, sales of physical gold or silver must be reported on Schedule D of Form 1040 of your tax return. This is the case not only for gold coins and ingots, but also for most ETFs (exchange-traded funds), which are subject to taxes of 28%. Many investors, including financial advisors, have trouble owning these investments.
They assume, incorrectly, that, since gold ETFs are traded like stocks, they will also be taxed as a stock, which are subject to a long-term capital gains rate of 15 or 20%. Investors often perceive the high costs of owning gold as profit margins and storage fees for physical gold, or management fees and trading costs of gold funds. In reality, taxes can represent a significant cost of owning gold and other precious metals. Fortunately, there is a relatively easy way to minimize the tax implications of owning gold and other precious metals.
Individual investors, Sprott Physical Bullion Trusts, can offer more favourable tax treatment than comparable ETFs. Because trusts are based in Canada and are classified as Passive Foreign Investment Companies (PFIC), U.S. UU. Non-corporate investors are entitled to standard long-term capital gains rates for the sale or repayment of their shares.
Again, these rates are 15% or 20%, depending on revenue, for units held for more than a year at the time of sale. While no investor likes to fill out additional tax forms, the tax savings that come from owning gold through one of the Sprott Physical Bullion Trusts and running for annual elections can be worthwhile. To learn more about Sprott Physical Bullion Trusts, ask your financial advisor or Sprott representative for more information. Royal Bank Plaza, South Tower 200 Bay Street Suite 2600 Toronto, Ontario M5J 2J1 Canada.
By Ed Coyne, Senior General Manager of Global Sales This is the case not only for gold coins and bullion, but also for most ETFs (exchange-traded funds), which are subject to 28% taxes. They assume, incorrectly, that since the gold ETF is traded like a stock, it will also be taxed as a stock, which is subject to a long-term capital gains rate of 15 or 20%. To be eligible, investors or their financial advisors must choose a qualified electoral fund (QEF) for each trust by completing IRS Form 8621 and filing it with their U.S. Investors always want to consider the total cost of ownership when weighing different precious metal investment options.
That said, given that investors can save a lot on taxes, considering PFICs like Sprott Physical Bullion Trusts makes sense, especially when prices are trending upwards. Sprott Asset Management LP is the investment manager of the Sprott Physical Bullion Trusts (the “trusts”). The prospectus contains important information about trusts, including investment objectives and strategies, purchasing options, applicable management fees, and expenses. Read the prospectus carefully before investing.
. This communication does not constitute an offer to sell or a request to purchase securities from the Trusts. However, the IRS considers physical quantities of metal to be a “collector's item.”. For collectibles, such as coins, works of art and ingots, the standard tax rate is 28%.
As a result, owning physical gold or owning funds that in turn hold physical gold means you can pay a higher maximum capital gains rate of 28%. ETFs that are not structured like a trust or that do not invest directly in a metal are not subject to the higher tax rate of 28% on capital gains for collectibles, according to the IRS memorandum. When you sell precious metals abroad, the laws of the country in which you sell will apply to the sale. Avoid investing in physical metal and you can minimize your capital gains taxes at the ordinary long-term capital gains rate.
Alternatively, you can also invest in products that invest in physical ingots and effectively purchase the metals on your behalf. The IRS has specific rules that determine which sales of precious metals require the dealer to submit this form. According to accountants, the IRS treats ETFs backed by physical precious metals as collectibles for tax purposes. Current law does not require merchants to declare sales of jewelry, even when it comes to qualified pieces in 22,000 or 24,000 ingots, or in quantities exceeding the 25-ounce limits that apply to ingots and many coins.
Investors, the benefits of physical possession of gold and other precious metals, such as silver, platinum and palladium, are in for a surprising surprise when assets are sold and it's time to pay taxes. Investments in precious metals are more volatile on a daily basis and have a higher overall risk than other sectors, as they tend to be more sensitive to economic data, political and regulatory events, as well as to underlying commodity prices. It has to be an investment in a similar situation, so if you sell gold, you'll have to reinvest the profits in precious metals. The Internal Revenue Service (IRS) classifies gold and other precious metals as “collectibles”, which are taxed at a long-term capital gains rate of 28%.
The International Council on Tangible Assets (ICTA) has published guidelines on which precious metal transactions should be reported to the IRS based on negotiations with the IRS. .