Physical gold and taxes

[MediumTex]

I really don't think I would mess with any kind of gold fund for gold fund switch in order to avoid the 31 day wash sale requirement.

I'm sure lots of people do this sort of thing, and I'm sure that most of them never get caught.  I just don't like this kind of thing myself.  The IRS would almost certainly claim that this was a "step transaction".

From a risk/benefit perspective, the benefit IMHO is not outweighed by the risk considering that if you sit out 31 days there is no risk at all and you are unlikely to miss too much price action in just 31 days.

Everyone has a different risk tolerance when it comes to these things, though.

[Greg]

I really don't think I would mess with any kind of gold fund for gold fund switch in order to avoid the 31 day wash sale requirement.

I'm sure lots of people do this sort of thing, and I'm sure that most of them never get caught.  I just don't like this kind of thing myself.  The IRS would almost certainly claim that this was a "step transaction".

From a risk/benefit perspective, the benefit IMHO is not outweighed by the risk considering that if you sit out 31 days there is no risk at all and you are unlikely to miss too much price action in just 31 days.

Everyone has a different risk tolerance when it comes to these things, though.

As a possible alternative, would it be potentially advisable for tax loss harvesting purposes to sell off whatever you need to for the gold ETF to balance out and buy a corresponding amount in a silver ETF such as SIVR. Silver I would think would be significantly different than gold and you'd still be exposed to precious metals that you might be underexposed to otherwise. I realize silver doesn't behave the same way as gold but it might be an okay switch for a short-term basis at least.

[MediumTex]

I really don't think I would mess with any kind of gold fund for gold fund switch in order to avoid the 31 day wash sale requirement.

I'm sure lots of people do this sort of thing, and I'm sure that most of them never get caught.  I just don't like this kind of thing myself.  The IRS would almost certainly claim that this was a "step transaction".

From a risk/benefit perspective, the benefit IMHO is not outweighed by the risk considering that if you sit out 31 days there is no risk at all and you are unlikely to miss too much price action in just 31 days.

Everyone has a different risk tolerance when it comes to these things, though.

As a possible alternative, would it be potentially advisable for tax loss harvesting purposes to sell off whatever you need to for the gold ETF to balance out and buy a corresponding amount in a silver ETF such as SIVR. Silver I would think would be significantly different than gold and you'd still be exposed to precious metals that you might be underexposed to otherwise. I realize silver doesn't behave the same way as gold but it might be an okay switch for a short-term basis at least.

Are you that concerned about sitting out of an asset class for 31 days?

The problem with the silver idea, and I'm not saying that it doesn't work just fine (it may), but you are still entering into the transaction for the sole purpose of skirting the wash sale rules.  That's the basic problem with any of these ideas--their purpose is to evade the 31 day wash sale requirement.

Of course, you could tell a different story about what your actual intent was if ever asked, but a strategy that is contingent upon successfully misrepresenting your intentions after the fact isn't, to me, a good approach.

I'm conservative in these things, though.

[WildAboutHarry]

Of course, you could tell a different story about what your actual intent was if ever asked, but a strategy that is contingent upon successfully misrepresenting your intentions after the fact isn't, to me, a good approach.

Run for it? Running's not a plan! Running's what you do, once a plan fails!

[Greg]

Are you that concerned about sitting out of an asset class for 31 days?

The problem with the silver idea, and I'm not saying that it doesn't work just fine (it may), but you are still entering into the transaction for the sole purpose of skirting the wash sale rules.  That's the basic problem with any of these ideas--their purpose is to evade the 31 day wash sale requirement.

Of course, you could tell a different story about what your actual intent was if ever asked, but a strategy that is contingent upon successfully misrepresenting your intentions after the fact isn't, to me, a good approach.

I'm conservative in these things, though.

I wouldn't say I'm concerned in being out of an asset class. Maybe more of a I want as much as possible to have my cake and eat it too. You'd probably understand the lines better for what constitutes as a wash sale or what would get the IRS on my tail but I'm just interested since I'm still new at this.

The same would go for if you had an ETF tracking the Total Stock Market and you sold that at a tax loss to purchase an ETF that tracks the S&P 500. I would think both are sufficiently different from each other and you could still "profit" from being exposed to the asset class while taking a tax loss.

Right now I'm still being pretty conservative about stuff but I'm interested in helping my investments as much as I can.

And towards WaH, what a great movie. Makes me think of Kevin Bacon which makes me want to make some bacon for lunch. Good plan!

[steve]

I really don't think I would mess with any kind of gold fund for gold fund switch in order to avoid the 31 day wash sale requirement.

I'm sure lots of people do this sort of thing, and I'm sure that most of them never get caught.  I just don't like this kind of thing myself.  The IRS would almost certainly claim that this was a "step transaction".

From a risk/benefit perspective, the benefit IMHO is not outweighed by the risk considering that if you sit out 31 days there is no risk at all and you are unlikely to miss too much price action in just 31 days.

Everyone has a different risk tolerance when it comes to these things, though.

I think GTU is not substantially identical to GLD or IAU and would not be a wash sale, this is just my opinion. I think you would be safe switching IAU for GTU or the other way around.

[Pointedstick]

I really don't think I would mess with any kind of gold fund for gold fund switch in order to avoid the 31 day wash sale requirement.

I'm sure lots of people do this sort of thing, and I'm sure that most of them never get caught.  I just don't like this kind of thing myself.  The IRS would almost certainly claim that this was a "step transaction".

From a risk/benefit perspective, the benefit IMHO is not outweighed by the risk considering that if you sit out 31 days there is no risk at all and you are unlikely to miss too much price action in just 31 days.

Everyone has a different risk tolerance when it comes to these things, though.

I think GTU is not substantially identical to GLD or IAU and would not be a wash sale, this is just my opinion. I think you would be safe switching IAU for GTU or the other way around.

Just did that today, as a matter of fact. Managed to grab the GTU at a 1.1% premium, which didn't seem too bad. I made a small capital gain on the IAU sale, so I'm not to worried about anything.

[Greg]

I've been looking at the GTU discount thread and started looking at the premium/discount to NAV.

I'm assuming the best way to think of GTU is holding gold in a country other than the United States and that if you purchase the fund at a premium lower than purchasing gold bullion from a dealer that that would be a good idea?

I realize there is paperwork as well for capital gains each year. I'll have to look that up. But at a ordinary income for long-term gains (up to 28%) for IAU or bullion vs. a potentially lower rate for capital gains for GTU, it might make sense if holding gold in a taxable account (as I am).

As a sidenote, I'm trying to look up what LTCG will be for collectibles in 2013 but I haven't found it yet. Not sure what it would be and based on that whether it merits purchasing GTU if there is a substantial differences between LTCG of GTU vs. a collectibles status.

[Greg]

I just found this which I thought was interesting. Does anyone know if this is true?

It states that wash sale rules don't apply to items that are taxed as "collectibles" (see Wash Sale Rule in document below)

http://www.moffatt.com/Documents%20and% ... 202012.pdf

The only thing I'm wondering about is that in my Sharebuilder account I got a wash sale from selling silver shares at a loss before the 31 days was up. Not sure if Sharebuilder just assumes that since it was an ETF (SIVR) that it was a regular stock that would be charged at regular stock capital gains rates versus collectibles status.

[Pointedstick]

I really don't think you have to worry about the long-term capital gains tax rate increasing next year. Congress is in no hurry to let those tax cuts expire, and just about the only think the Democrats and Republicans actually seem agree on is that everything but the top income tax rates should be made permanent. I don't hear the Democrats talking much about the long-term capital gains rate for people without a few million bucks, but I would assume it's included since it's not really a point of contention and it continues to remain at 15% despite years of brinksmanship over the top income tax rate. And you can bet your bottom dollar that the Republicans aren't going to let it rise. In addition, Republicans are generally better at playing the politics game than Democrats are, so they can do more with fewer numbers. Large majority in the house + slim minority in the Senate = me not worried.