Gyroscopic Investing

Since gold may be bottoming this month as I forecasted, I am now curious about the alleged tax negatives in buying CEF's such as PHYS over the unit trusts such as GLD.

One thing I do know is the collectibles tax does not apply to PHYS, so holding GLD long-term and paying 15% or 28% seems really stupid, especially if you get a lower income tax rate from holding short-term or a CEF.

What is the deal about some tax form that needs to be filed after buying (selling?) PHYS?

Got me. I've been filling out that form for quite a few years due to my holdings of CEF (Central Fund) and can't figure out why people think it is any worse than a lot of other tax forms.

Gold bottomed last month not this month like you predicted...still haven't learned from your previous mistakes I see...

Libertarian666 wrote: Got me. I've been filling out that form for quite a few years due to my holdings of CEF (Central Fund) and can't figure out why people think it is any worse than a lot of other tax forms.

My only concern is with Turbotax and whether the form is available to e-file.

buddtholomew wrote:

Libertarian666 wrote: Got me. I've been filling out that form for quite a few years due to my holdings of CEF (Central Fund) and can't figure out why people think it is any worse than a lot of other tax forms.

My only concern is with Turbotax and whether the form is available to e-file.

I haven't seen an e-filing option for that form, although I use H&R Block rather than Turbotax.
However, for a possible 0% rate, and maximum 23+%, rather than regular income tax rates up to 31+% max, I'll mail in my return on paper.

MachineGhost wrote: What is the deal about some tax form that needs to be filed after buying (selling?) PHYS?

Note that to get the capital gains tax treatment, form 8621 has to be filed each year you own the fund - not just when you sell (or buy).

rickb wrote:

MachineGhost wrote: What is the deal about some tax form that needs to be filed after buying (selling?) PHYS?

Note that to get the capital gains tax treatment, form 8621 has to be filed each year you own the fund - not just when you sell (or buy).

Correct.

MangoMan wrote: Is it possible to e-file your return and then send 8621 in a week later with a 1040-X?

I am not a tax attorney, but I don't see why not.

buddtholomew wrote: Gold bottomed last month not this month like you predicted...still haven't learned from your previous mistakes I see...

  I'll rephrase my sentence since you can only know a bottom after the fact.  "Since gold may have bottomed in December and may be confirming the bottom this month..."  Price action has not confirmed the bottom yet and this is the seasonal high in gold.  I remain skeptical until the market convinces me otherwise.

What, pray tell, "previous mistakes" have I not learned from and how are you wise to this?

rickb wrote: Note that to get the capital gains tax treatment, form 8621 has to be filed each year you own the fund - not just when you sell (or buy).

And this is for it to be treated as ordinary income or regular capital gains taxes as opposed to the collectibles tax?  If so, that seems reasonable.

Someone ought to produce a matrix showing under what situations and tax brackets is the optimal approach.  For example, if you're in the 10% bracket, it seems far better to sell after holding no greater than 365 days than pay a 15% collectibles tax.  That would apply to both bullion and these CEFs.

MachineGhost wrote:

buddtholomew wrote: Gold bottomed last month not this month like you predicted...still haven't learned from your previous mistakes I see...

  I'll rephrase my sentence since you can only know a bottom after the fact.  "Since gold may have bottomed in December and may be confirming the bottom this month..."  Price action has not confirmed the bottom yet and this is the seasonal high in gold.  I remain skeptical until the market convinces me otherwise.

What, pray tell, "previous mistakes" have I not learned from and how are you wise to this?

Not going to engage you any further. Anything you say will be verified independently or ignored.

MachineGhost wrote:Someone ought to produce a matrix showing under what situations and tax brackets is the optimal approach.  For example, if you're in the 10% bracket, it seems far better to sell after holding no greater than 365 days than pay a 15% collectibles tax.  That would apply to both bullion and these CEFs.

The "28%" collectibles tax doesn't work like that.  My understanding is that the collectible tax rate is the same as your ordinary income tax rate, capped at 28%.

buddtholomew wrote: Not going to engage you any further. Anything you say will be verified independently or ignored.

Whatever!

Xan wrote: The "28%" collectibles tax doesn't work like that.  My understanding is that the collectible tax rate is the same as your ordinary income tax rate, capped at 28%.

Yeah, but everytime I look it up its always "at 28%" (which is wrong) or then I find its "15% or 28% depending on your tax bracket".  There seems to be a lot of non-clarity on this issue.

EDIT: The authoritative answer: http://www.irs.gov/taxtopics/tc409.html

MachineGhost wrote:

Xan wrote: The "28%" collectibles tax doesn't work like that.  My understanding is that the collectible tax rate is the same as your ordinary income tax rate, capped at 28%.

Yeah, but everytime I look it up its always "at 28%" (which is wrong) or then I find its "15% or 28% depending on your tax bracket".  There seems to be a lot of non-clarity on this issue.

EDIT: The authoritative answer: http://www.irs.gov/taxtopics/tc409.html

That says the max is 28%, but that's only the case if you're in the 28% or higher bracket.  It doesn't seem to address what it is below the max.

The authoritative answer would be here:
Schedule D
and here:
Schedule D Instructions (pages 15-16, specifically)

If we can untangle that, it should answer all the questions.  The worksheet on pages 15-16 does have a "multiply by 28%" line, but only on amounts left over and not caught by other things earlier.

Xan wrote: That says the max is 28%, but that's only the case if you're in the 28% or higher bracket.  It doesn't seem to address what it is below the max.

The authoritative answer would be here:
Schedule D
and here:
Schedule D Instructions (pages 15-16, specifically)

If we can untangle that, it should answer all the questions.  The worksheet on pages 15-16 does have a "multiply by 28%" line, but only on amounts left over and not caught by other things earlier.

Wow, that is some really obtuse stuff!  I went through all the relevant forms in TurboTax but it didn't seem to do the 28% Rate Gain Worksheet properly so I overrode it (it didn't fill it in automatically from Schedule D like it should have).

My impression is this: you are charged at your marginal income tax bracket for all short-term collectible gains.  The collectible tax comes into play when you have both a) long-term gain and b) your taxable income is at least the 25% bracket.  You will be charged a 15%, 20%, 25% or 28% tax.

For example, say my taxable income was $36,900 and an extra $25,000 is long-term capital gains from selling gold.  The tax on that gold proceeds is $5,088 which is an overall 8.22% effective tax rate or a 20.352% collectibles tax.

So essentially if you're at least in/above the 25% tax bracket, the collectibles tax is a break when holding long-term, though perhaps not as good a deal as the capital gains tax.  Below that theres no apparant difference between holding short-term and long-term.

MG, I don't believe you or your stinking numbers. Please provide proof or I will pummel you senseless in this forum.

You have been warned!

Reub wrote: MG, I don't believe you or your stinking numbers. Please provide proof or I will pummel you senseless in this forum.

You have been warned!

Eat me!

MachineGhost wrote:

Reub wrote: MG, I don't believe you or your stinking numbers. Please provide proof or I will pummel you senseless in this forum.

You have been warned!

Eat me!

MG, I think Reub is on your side on this one.  He's sarcastically mocking your detractors.

Xan wrote:

MachineGhost wrote:

Reub wrote: MG, I don't believe you or your stinking numbers. Please provide proof or I will pummel you senseless in this forum.

You have been warned!

Eat me!

MG, I think Reub is on your side on this one.  He's sarcastically mocking your detractors.

And MG is just satirizing himself

Sorry, I was being sarcastic too, but he really annoyed me by bringing it up again, so I forgot to add the smiley.

Something is bugging me now, though.  I used the income level for the beginning of the marginal 25% bracket but if the collectible tax re: that was 20% or so, what happened to the 15% rate???

Also to bring this all back on topic, these collectible rates need to be compared to regular capital gains rates which I assume is what form 8621 gets you.  My gut feel is below 25% bracket then its a wash either way, so why bother with the form and a CEF?  So there is a matrix that could be designed with the breakpoint between 15% and 25% brackets.  Aren't most retirees going to be in the 15% bracket anyway, unless they're at a high level on the hedonism treadmill?

EDIT: Looks I conflated LTCG with the collectibles tax.  But I quit.  I can't figure out this B.S..  Too frustrating.  This is what I came up with so far:

[img width=1024]http://i61.tinypic.com/2cxuk5h.png[/img]

MangoMan wrote: Hint, hint: It would really make things clearer if people would simply use some clarity when being sarcastic.

What, are we your slaves?

Xan wrote:

MachineGhost wrote:Someone ought to produce a matrix showing under what situations and tax brackets is the optimal approach.  For example, if you're in the 10% bracket, it seems far better to sell after holding no greater than 365 days than pay a 15% collectibles tax.  That would apply to both bullion and these CEFs.

The "28%" collectibles tax doesn't work like that.  My understanding is that the collectible tax rate is the same as your ordinary income tax rate, capped at 28%.

Correct, as long as it is long-term. The short term collectible tax rate is the same as ordinary income tax (which is also the same as "regular" short-term capital gains taxes).

MangoMan wrote:

LC475 wrote: What, are we your slaves?

Yep.

Then how do I get promoted to head-slave?