My CPA gave me some first rate information about selling and trading silver and gold. First off, the IRS regards gold and silver in very different lights as you will see if you trade or sell either metal. I will use the CPA's exact words so I don't any spin on these rules. A few comments on trades (mine) will help get a better handle on this information. I am not a tax professional and am not offering this as advice.
Anything you do in the sale, trade or purchase of PMs may affect your tax situation and you should consult with a tax professional. What I am outlining is some information that will help guide you in your decisions. But tax laws change without notice, so be sure of your transaction before executing it.
1. If you plan to use an appreciated PM as a down payment on property, this is not considered a like-kind exchange. If appreciated gold and silver is used for a down payment, it would be considered a sale (of the metal) and a purchase of property. This makes the transaction taxable to the metals.
You want to purchase an empty lot for $100,000
You need to sell $100,000 in gold or silver to get cash
You exchange the $100,000 in cash for the empty lot
RESULT. The sale of appreciated gold or silver is a taxable event.
You want to purchase an empty lot for $100,000
You exchange $100,000 in appreciated gold or silver for the lot
RESULT This is a taxable event on the exchange of the gold or silver
Neither example is a like kind exchange, therefore the sale/exchange of the gold or silver is a taxable event.
2. If I trade a certain amount of gold for an equal amount of silver is that a taxable event?
This trade is taxable if the gold has an appreciated value. This is not considered a 'trade' from an income
tax position; rather it is regarded as a sale of gold and a purchase of silver. Here is the kicker. The IRS considers gold and silver fundamentally different from a use standpoint. The IRS considers gold primarily an
'Investment' metal', and silver an industrial commodity. Therefore the IRS does not consider this trade 'like kind'
I did a trade of gold for silver a few months ago but my original purchase price for the gold was higher than the value when I traded for silver. I think I have a tax loss in this case but I'm not sure if I will take it. For no other reason that I don't the IRS to know I own precious metals.
3. If I trade a certain amount of gold for gold or silver for silver, is that taxable?
Trading gold for gold or silver for silver can qualify for like kind exchange (1031) treatment. The rules here
are that the gold or silver must be a like kind to that sold. For example, the exchange of US $20 gold
coins for South African Kruggerands would NOT be considered like exchange, bot the exchange US coins
for US coins would be a like kind exchange.
On a personal note I traded some 100 oz silver ingots for rounds this year. That was a like kind
exchange. I did this because I like rounds better.
4. What is the short and long term holding periods for silver and gold rounds, bullion or ingots
Short term is less than 1 year. Long term is greater than one year. Wash sale rules apply to sales and
purchases of same precious metals within 30 days of each other. A wash sale is basically selling a security or metal to get a loss and buying back same within 30 days
The churn to get a loss is frowned on by the IRS
I will assume that if you sell silver at a loss and buy gold or vice versa, you would not be subject to the
wash sale rule since gold and silver are considered different by IRA rules. Check with your CPA on that
however, since rules can change without notice
5 What is the tax rate for long term capital gains for gold and silver coins, rounds or ingots
Personal note---this can get tricky due to many factors including your present income level, state
tax laws, the type of bullion you sell as well as any loss carry forwards you might have to shelter
capital gains on metals.
Maximum LT cap gains rate is 28% Some metals are as low as 15%, the present maximum federal
capital gains. Short term cap gains rates are probably going to be more along the line of ordinary
income tax rates.
Your income will be a determinant as to whether you pay capital gains and how much. Some gold has
the higher 28% rate Do your own diligence when working metals for profit. Most of us are buyers now but
there will come a time when we sell.
Paying taxes or avoiding taxes is a very volatile subject. I prefer to pay my taxes, using the best tax
rulings to my benefit and paying my CPA to work the rules. But pay I will if I have income, as much as
I hate feeding the beast. To the IRS, you are guilty until proven guilty
The governments, both state and local, are bankrupt If you steal from them they
will nail you to the wall. They can't stand the competition.