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Reporting Requirements for Gold: What You Need to Know (excerpt from Chapter 18, The ABCs of Gold Investing)
There has been and continues to be a great deal of confusion about federal reporting requirements with respect to gold purchases and sales. Part of the problem results from the fact that it took the Internal Revenue Service almost seven years to publish regulations on gold reporting from the time they were required by the Tax Equity and Fiscal Responsibility Act. In addition, many gold brokers have an incomplete understanding of the regulations themselves and have often passed along the wrong information to gold investors. It took several years of negotiations between the Industry Council for Tangible Assets (ICTA) and the IRS just to get specific regulations published.
The following are reportable items as listed by the Internal Revenue Service. Also shown is the threshold number of ounces that triggers the need to file a Form 1099 with the IRS. Remember, the reporting requirement occurs when you as a client sell, NOT when you purchase.
|Gold bars (any size bars totaling 1 kilo -- 32.15 troy ounces -- or more)|
|Gold Maple Leafs (25 ounces or more)|
|Gold Krugerrands (25 ounces or more)|
|Gold Mexican Onzas (25 ounces or more)|
|Silver bars (1,000 ounces or more)|
|U.S. 90 percent silver coins, pre-1965 ($1,000 face value or more)|
|Platinum bars (25 ounces or more)|
|Palladium bars (100 ounces or more)|
Also, more than one transaction engaged in for the purpose of circumventing the reporting laws is to be treated as a single transaction. This includes transactions by more than one member of the same family. The 1099s also require the seller's Social Security number. The ICTA warns:
"This information is provided to assist you and is not intended to be used by you as the sole guideline for complying with these regulations. You should consult your own tax professional. While a stricter interpretation of the regulations is possible, ICTA believes the above guidelines fulfill the spirit of the negotiations and the intent of the Internal Revenue Service."
I feel obligated to pass along the same caveats. Much remains unclear with respect to these reporting requirements.
Although gold coins not listed above are now exempt from reporting, there is no guarantee they will be exempt in the future. On the contrary, since the intent of the law is to raise revenue, it is likely that coins not on the list now will be included in future regulations, especially if the gold price rises. In addition, it is possible for the same reasons that the number of coins required for the reporting threshold will be reduced as the price of gold rises. Remember, from the point of view of the U.S. Treasury, this is a revenue issue. For now, the best solution is to own at least half of your gold in pre-1933 $20 gold pieces. (Ed. Note: Since "The ABCs of Gold Investing" 1997 publication date, Mr. Kosares has added pre-1933 European gold coins, like the British sovereign and Swiss 20 franc coins, as recommended acquisitions for those seeking to maximize privacy in their gold holdings.) They have been exempted repeatedly from various regulations -- including Form 1099 reporting requirements -- because of their status as collectors' items. Finally, you cannot escape paying taxes on your gains simply because an item is not listed by the U.S. Treasury. You are still responsible for taxes on your gains whether or not the item falls into a reportable category.
USAGOLD-Centennial Precious Metals' Client Memorandum, 'Gold Confiscation: How likely is it? What you can do about it', covers the Income Tax Regulations with respect to gold reporting requirements in detail (pages 22 and 23).
The foregoing is meant to serve as an introduction to the reporting requirements for gold. The law and regulations are lengthy and complicated. If you are in doubt, the best course of action is to always discuss the matter with a tax consultant.