Similarly, for the sale of silver ingots and cartridges to justify notification, each piece of silver must have a fineness of at least. Finally, sales of palladium and platinum bars also have reporting requirements. Many investors prefer to own physical gold and silver rather than exchange-traded funds (ETFs) that invest in these precious metals. While the tax implications of owning and selling ETFs are very simple, not many people fully understand the tax implications of owning and selling physical ingots.
The following describes how these investments are taxed, as well as their tax reporting requirements, cost base calculations, and ways to offset any tax liability resulting from the sale of physical gold or silver. The Internal Revenue Service (IRS) considers physical holds of precious metals such as gold, silver, platinum, palladium and titanium to be capital assets specifically classified as collectibles. Holdings of these metals, regardless of their shape, such as bullion coins, ingot ingots, rare coins or ingots, are subject to capital gains tax. Capital gains tax is only due after the sale of such shares and if the shares were held for more than one year.
While many tradable financial securities, such as stocks, mutual funds and ETFs, are subject to short- or long-term capital gains tax rates, the sale of physical precious metals is taxed slightly differently. Physical gold or silver holds are subject to a capital gains tax equal to their marginal tax rate, up to a maximum of 28%. This means that people who fall into the 33, 35 and 39.6% tax brackets only have to pay 28% for their physical sales of precious metals. Short-term gains on precious metals are taxed at ordinary income rates.
If you buy the metals yourself, the cost basis is equal to the amount paid for the metal. The IRS allows you to add certain costs to the base, which may reduce your tax liability in the future. Certain items can be added, such as the cost of appraisals. There are two special scenarios for calculating the cost base of physical gold or silver.
First, if you receive the metals as a gift, the cost basis is equal to the market value of the metals on the date the donor purchased them. If at the time of giving away the market value of the metals is lower than what the person who gave them to you paid, then the cost basis will be equal to the market value of the day you receive the gift. As for the second special scenario, if you inherit gold or silver, the cost basis is equal to the market value on the date of death of the person from whom you inherited the metals. Summary of the problem: investments in collectibles in individually managed qualified plan accounts.
Internal Revenue Service (IRS). J.M. Bullion.