Sprott Intends to Make Exchange Offers for Central GoldTrust and Silver Bullion

[LazyInvestor]

It seems we won't have time to trade as the day of conversion is Jan 19. Today is some holiday so markets are closed.

[Libertarian666]

I was able to sell my converted shares but I had to call Fidelity to do it.

[dragoncar]

I'm waiting until my annual contribution/rebalancing time next month.  Is there an urgent need to get out of phys?  Seems my taxes next April are screwed either way!

[Libertarian666]

I'm waiting until my annual contribution/rebalancing time next month.  Is there an urgent need to get out of phys?  Seems my taxes next April are screwed either way!

The need is that I hate Sprott's behavior in this situation and don't want to do business with them in any way, ever.

[al14]

Hello!
I was a GTU holder until PHYS took over a few days ago. Given that I always elect QEF option on my US tax form I do not find PHYS any different from GTU since the annual PFIC statements show no distributions since the inception in 2010. I'm a little confused by this, since the redemptions should cause adverse 28% collectible tax rate on US unit holders in Sprott PHYS, but there is no evidence as far as annual PFIC statements show. Is there another tax document that exposes US unit holders to 28% collectible tax rate, or is there something I don't understand?

[Reub]

I guess that this is my first day owning PHYS and I noticed that it closed down 0.34% vs. down 0.10% for GLD and IAU. Why is this?

[dragoncar]

Hello!
I was a GTU holder until PHYS took over a few days ago. Given that I always elect QEF option on my US tax form I do not find PHYS any different from GTU since the annual PFIC statements show no distributions since the inception in 2010. I'm a little confused by this, since the redemptions should cause adverse 28% collectible tax rate on US unit holders in Sprott PHYS, but there is no evidence as far as annual PFIC statements show. Is there another tax document that exposes US unit holders to 28% collectible tax rate, or is there something I don't understand?

Good question, and I'd like to know also.  I tried to find out what makes a gold holding collectible and it seems like closed-end funds are not whereas ETFs are?  I did search in the gold sub-forums but I couldn't find a recent summary of non-physical gold options.

[LazyInvestor]

Good you managed to sell. I still only see GTU at IB. I guess it'll take few days for them to convert the shares.

[Reub]

With the price of gold moving higher recently I hope that PHYS doesn't find a way to screw us on the conversion by not including us in these recent gains.

[Dmilligan]

Anyone have any guess as to how long this conversion will take? What's the soonest I will be free to sell out of PHYS?

[al14]

..and why would anyone want to sell their PHYS given that there is no difference whatsoever between it and GTU for tax or other purposes (besides redemption option, that is useless for most and doesn't affect US taxes)

[steve]

..and why would anyone want to sell their PHYS given that there is no difference whatsoever between it and GTU for tax or other purposes (besides redemption option, that is useless for most and doesn't affect US taxes)

I sold just because I do not want to have anything to do with Sprott because of  the takeover and the way it was done.  I made it work in my best interest taking advantage of a tax loss harvest.  I added to my core physical bullion and bought IAU and then also sold that for a tax loss harvest and now have GLD  As far as I know there is no wash sale rule for collectibles so that is also an advantage. 

[dragoncar]

..and why would anyone want to sell their PHYS given that there is no difference whatsoever between it and GTU for tax or other purposes (besides redemption option, that is useless for most and doesn't affect US taxes)

I sold just because I do not want to have anything to do with Sprott because of  the takeover and the way it was done.  I made it work in my best interest taking advantage of a tax loss harvest.  I added to my core physical bullion and bought IAU and then also sold that for a tax loss harvest and now have GLD  As far as I know there is no wash sale rule for collectibles so that is also an advantage.

Leaning toward keeping it now... If tax effect is the same and fees are similar.  I was under the impression that the redemption option WOULD affect US taxes

I'm not gonna make financial decisions out of spite

[al14]

Same here. As much as I detest what Sprott has done to Gold Trust I see no other option to maintain paper gold under favorable US capital gain taxation rules. My understanding is that shifting to GLD or IAU exposes to clearly spelled out 28% collectible tax rate, besides the ETF papers not being backed up by unencumbered metal in the vault.

[Dmilligan]

Anyone have any guess as to how long this conversion will take? What's the soonest I will be free to sell out of PHYS?

PHYS showed up in my Fidelity account today at market close. So, looks like the exchange has been effectuated.

[al14]

No PHYS in my brokerage, neither GTU is there. Showing 100% loss of entire investment. Is that a drill for things to come?
I'm extremely puzzled by investor irrationality: if the offer from Polar was overwhelmingly rejected by GTU unit holders just a few months ago, why would the same people elect to convert to PHYS in a landslide a few days ago, while there is almost no difference between what Polar wanted and what PHYS is? 

[steve]

Same here. As much as I detest what Sprott has done to Gold Trust I see no other option to maintain paper gold under favorable US capital gain taxation rules. My understanding is that shifting to GLD or IAU exposes to clearly spelled out 28% collectible tax rate, besides the ETF papers not being backed up by unencumbered metal in the vault.

The 28% gain rate depends on the bracket your in "When you sell collectibles, the special 0%, 15%, and 20% tax rates on long-term capital gains don't apply. Instead, you'll owe tax at your ordinary tax rate, with a cap of 28%. As is the case with all assets, short-term capital gains on the sale of collectibles are taxed at ordinary rates"
I also won't miss filing the required forms every year ( f8621) to take advantage of favorable capital gains treatment which can also change.
In the mean time with my tax loss harvest strategy I offset paying any capital gains tax on my profits and have banked losses to offset possible future gains.  If you really want  gold and not paper buy bullion and put it in a vault that is under your control.

[Libertarian666]

..and why would anyone want to sell their PHYS given that there is no difference whatsoever between it and GTU for tax or other purposes (besides redemption option, that is useless for most and doesn't affect US taxes)

Because I don't want to deal with "people" like Sprott.

[Libertarian666]

Same here. As much as I detest what Sprott has done to Gold Trust I see no other option to maintain paper gold under favorable US capital gain taxation rules. My understanding is that shifting to GLD or IAU exposes to clearly spelled out 28% collectible tax rate, besides the ETF papers not being backed up by unencumbered metal in the vault.

Other than buying CEF, of course.

Downside: silver content.
Upside: large discount, which is likely to go away at some point in the future.

If I had a significant amount of new money to put to work, that's probably what I would do.

[Libertarian666]

What about physical gold?  I know I'm off topic, but I really think that when gold is needed most, we won't want to be looking at it on a screen, we'll want it in our possession.

Sure, but you're right that it's off topic in this thread. 

[LazyInvestor]

Mine converted fine too. I guess I have to also rationally check their prospectus and the trust rather than selling it just because I'm pissed off with the conversion.

[dragoncar]

Did anyone have to pay some brokerage fees for the conversion?  Is your cost basis adjusted correctly?  I haven't checked mine yet

[LazyInvestor]

No conversion fees. Partial share was sold to round down the number of shares (0.2 share in my case) and cash was deposited. Cost basis looks fine.

[Reub]

I'll bet that the ones that haven't converted yet are held in Vanguard. They are dreadfully slow.

[dualstow]

Showed up in Vanguard Jan 20. Well, I guess it showed up today (21st), but in transaction history, the Corp Action is 1/20.