Gold Coins & Gold Bars
More Article Years
This article was first published
(October 15, 2004)
But the worst ‘report’ of all is the idea of being ‘reported’ to the government for buying gold bullion.
This report is about reporting and gold.
TO BEGIN WITH, THERE IS NO REPORT WHEN YOU BUY GOLD BULLION
Of all the thousands of forms generated by the various federal agencies, there is not a single one available for a precious metals dealer or broker to fill out and ‘report’ a purchase even if he or she even wanted to.
BACKGROUND TO THE REPORTING REPORT
Potential gold buyers in the US often encounter a lot of uncertainty about gold ownership under the laws of the United States. A number of factors contribute. But all the confusion started back when the Federal government under Franklin Roosevelt barred the private ownership of gold by US citizens starting in 1933, a state of law which continued until its repeal in 1975.
During a period stretching from the Great Depression to the Disco Era, only licensed dealers and users could own gold. Our favorite brilliant metal became a forbidden element, seen by Americans mostly in the watered-down form of commercial gold jewelry. Gold did more than go underground, it virtually disappeared from American consciousness. The awareness of gold, its beauty, and its legitimacy as a monetary metal was lost for over four decades.
The longstanding ‘ban on gold’ meant that even after the right of gold ownership in the US was reinstated in 1975, a cloud still hung over this timeless element. Gold – since 1933 declared obsolete as money, forbidden and even unpatriotic to own - was not suddenly and miraculously restored to its former legitimacy with a stroke of Gerald Ford’s pen. Two whole generations had grown up in a world in which gold was a unknown and illegal substance.
People still perceive an air of the forbidden clinging to gold.
Today when you decide to buy gold, you find that your banker doesn’t handle it, nor your credit union, nor your brokerage house. Purchasing gold means you are not doing business with the financial institutions that you are used to comfortably dealing with. Thus, the acquisition of gold can seem like a shadowy undertaking. And your quest for a gold source may put you in contact with companies and sales people who are not afraid to exploit this sense of the unknown and the illicit.
In a sense, gold today in the US is still an ‘underground’ element. Let’s see what we can do to bring gold into the light of day.
So many myths are floated about gold ownership, and none is more pervasive and patently false that somehow when a US citizen purchases gold bullion that act must be “reported,” at least to the IRS, if not to some central registry maintained by the Federal government.
The fact is that in 1974 when President Gerald Ford signed into law the bill that Congress passed permitting US citizens to freely hold gold in all forms, a right that had been denied since Franklin Roosevelt’s Banking Act of 1933 was now fully restored, and all regulations and restrictions concerning US citizen’s ownership of gold were removed.
In short, you are free to own gold in any quantity without it becoming a matter of interest to the US government. In fact, you can buy gold in whatever amount you can afford – stack gold bars in your closet if you’d like, bury gold coins in your backyard, or cast a big cube of gold and made it the centerpiece of your living room. Go ahead, the truth is that the government doesn’t care.
I know some of you who have been subjected to the paranoia pitch of many ‘numismatic coin’ marketers probably can’t even believe that. But consider this: the US Mint, a division, like the IRS, of the U.S. Treasury Department, is the coiner of the most popular gold bullion choice in this country. And while facilitating the sale of gold bullion as an investment through promotional efforts including print ads and free brochures, the Treasury has never expressed the slightest interest in who is buying their very own gold bullion products.
Yes, the US gold Eagle, the “American Krugerrand,” the most popular gold bullion choice in America virtually since its introduction in 1986, is produced by the very same Treasury Department that houses the Internal Revenue Service. And the seemingly omniscient IRS, bogeyman to many old-school gold owners, doesn’t even bother to ask its own fellow Treasury employees to keep track of who’s buying all that gold.
It just doesn’t seem right, somehow, to those who believe in governmental money conspiracies, that gold Eagles can be purchased without there being some ‘reporting’ or at least the ‘registration’ of the purchase of gold Eagles. Furthermore, gold Eagles are not even serially numbered, and have no imbedded microchip or RFID transmitter – they are simply anonymous measures of gold, precious metals instruments consistent with gold’s function over the past few millennia as the ultimate in private and portable wealth. So there you have it.
Some purchases are in fact ‘reportable’ to the IRS, but they have nothing to do with gold and everything to do with cash. And by cash, the IRS means currency, bills, Federal Reserve Notes, the long green – you know, dead presidents. The IRS is very alert about piles of cash in excess of $10,000, whether used to purchase real estate, an airplane or yacht, or, yes, even gold. Write a check, or wire funds electronically, and it’s a non-event. But if you insist on doing business, any kind of business, with satchels full of green stuff, then the IRS has the legal right to ask, “Say, where did you get all that money?”
REPORTING YOUR GAINS OR LOSSES
But now let’s consider that day when you convert some of your gold back to US dollars. For that tax year you will have an obligation to declare gains or losses, yet confusion sometimes arises because your broker/dealer’s reporting requirements differ from your obligations as a taxpaying citizen.
First off, let’s establish the fact that any purchase of gold bullion, coins or bars, is in the eyes of the IRS simply an investment. And if you do sell your gold sometime in the future, the IRS will want to know if you have generated either a capital gain or a loss on that sale, whether long-term or short-term depending on the length of time you held the investment.
Under the Broker Reporting Act of 1982, certain recognized contract amounts of popular forms of precious metals bullion, including gold, silver, platinum, and palladium, are subject to reporting by the broker/dealer to the IRS on form 1099-B upon the sale of such bullion by US citizens. Just as traders in soybeans and T-Bill contracts have their sales reported to the IRS, so do investors in physical forms of commodities.
HOWEVER, as far as you as an investor are concerned, no bullion items are exempt from normal capital gains treatment as investments, even those particular forms (gold Eagles, for instance) that may not have been in existence in 1982.
It’s important not to confuse your dealer’s obligation under the law to report your sale of bullion items which meet the definition of regulated commodity contract material with your own obligation to report to the IRS your sale of ANY bullion products as a gain or loss within a certain tax year.
Unfortunately, too many individuals who buy and may someday sell bullion and coins are getting misleading advice from commission salespeople. These marketers are making ambiguous and misleading use of such words and phrases as ‘reportable, ‘non-reportable,’ ‘exempt from reporting,’ etc., to give people false ideas of what is entailed in owning different forms of gold.
To you and me, gold and gold coins may have a lot of properties that make them seem special, precious, even magical – but to the IRS they’re just like any other investment.
Yet there are those who don’t fully understand the taxable status of these commodities. Some people are just not careful about receipts and records, and feel that someday they, or their heirs, will simply sell the items for cash with no ‘report’ or record ever being made of the transaction. And down this road of thinking lies only trouble in the future.
The idea of playing cat-and-mouse with the Internal Revenue Service may appeal to some independent-minded cowboy types who simply feel that the IRS gets enough of their hard-earned dough already. But if they play that game, they should remember who is the cat and who is the mouse, and how that game almost always ends.
YOUR FINAL REPORT
In the most recent modern Age of Gold in the US, 1975-1980, much of the gold bullion business was strictly cash. In that era before federal cash reporting requirements, green American money flowed more freely than today.
Back in those wild and wooly days when buying gold was a new and exciting experience for American citizens, written receipts were sometimes treated rather casually. Buying gold isn’t like buying a lawn mower, where you would hold onto the store receipt until you took the mower home and found out if it really worked. Gold, once purchased, you knew would perform just fine, and the paper receipt…worthless paper..seemed unncecessary, the whole idea of the transaction being to trade your phony paper for gold!
So today, there are in safe deposit boxes and hiding places an awful lot of precious metals bullion and coins bought during that Golden Age, stashes that are now coming to the end of their owner’s time to accumulate and hold such treasures.
Many such hoards of precious metals were bought some two or three decades ago, but the owners no longer have good documentation of their original costs. Some of these people have reached an age where they want to clean out and tidy up their holdings so that their heirs won’t have too much of a chore with their estate. But they find themselves in a sort of Twilight Zone concerning their bullion material – if they sell their bullion, how do they account for their costs when figuring capital gains or losses? This absolutely panics some people, even those who are going to leave an estate well under the $1.5 million threshold for estate taxes, and that’s a shame.
The good news is this: a simple solution if you don’t have all your receipts is to explicitly leave precious metals in your will for your chosen heirs. Simply make specific endowments of so many ounces to each of those whom you love. Upon your death, the material you leave will acquire a brand new cost basis for your heirs - they will have the gold AND a documented cost basis for it.
And if you don’t feel like giving your goodies to anyone in particular, give them to your church or favorite charity! You can do that today, and take the deduction for the gift based on the current value of the material. And if they don’t know how to liquidate bullion items, have them give us a call.
And then, happily for you if you have an unfortunate history of sloppy record-keeping, all will be forgiven.
Nothing in the above article should be taken as tax advice. This report was written to bring up some points about precious metals and the 'reporting' issues, and nothing else. The US tax code is thousands of pages long, is revised and changed constantly, and I've never read it. Please consult a qualified tax professional with any questions having to do with your taxes.
Information and data presented here are from sources believed to be reliable. Every effort has been made to check for accuracy, however we can’t absolutely guarantee the reliability of information or statistics garnered from outside sources and presented on this site. We do not offer financial advice or counseling, and nothing we present on this web site should be construed or accepted as financial advice.
OnlyGold.com is owned & published by: Georgia Sonora Co. Inc.
Copyright - Georgia Sonora Co. Inc. 1998 - 2013 : All rights reserved.