by A.W. Berry

Created on: August 13, 2009

The tax implications of investing in precious metals can be assessed in several ways, each of which can have an impact on the net-profit an investment makes. These ways include the holding or sale of precious metals as 1) tangible property and intangible property, 2) capital gains, and 3) personal business. This article will discuss these means by which precious metals can be taxed, the situations in which the tax applies, and the levels at which each method of taxed is implemented. There are also methods and financial instruments that may avoid or reduce taxation of precious metals, back room estate sales excluded. These techniques will be elaborated upon in the 4th part of this article.

I) TAXATION OF TANGIBLE AND INTANGIBLE PROPERTY:

Precious metals are considered tangible property rather than real property. Thus in some cases, the ownership of precious metals such as gold, platinum, titanium, and silver may or may not carry property related tax. The U.S. Federal government does not tax ownership of tangible property in the form of precious metals until they are sold and/or income is received in relation to them. However, some U.S. States such as Georgia, do tax ownership of personal precious metals. Some States that do not tax ownership of precious metals are Delaware, Pennsylvania, and Hawaii,

II) TAXATION OF CAPITAL GAINS:

Proceeds from the sales of precious metals are taxable as income when those proceeds yield a profit from the original price after qualified cost basis adjustment. Not only are the sale of precious metals made for investment taxable as a capital gain on intangible property, they may also be taxable as income from sale of collectible assets, which for all but the lowest income tax bracket is equal to or higher than the maximum long term capital gains tax. This means that sales of Gold funds could end up taking 28% off your capital gains instead of 15%.

III) TAXATION THROUGH 'PASS THROUGH' BUSINESS:

Sole proprietorships, S-Corporations and Partnerships all receive flow through income on individual tax returns. This means end of tax year retained income from a gold collectibles dealer structured as sole proprietor or S-Corporation would be passed through onto the individual owners' 1040 tax returns as income. This income is then subject to normal deductions and exemptions and then taxed at the income tax bracket rate in which the individuals' taxable income validates. Additionally, a minority portion of U.S. States assess tax on business

• 1
• 2
• Next Page >>