Gold buying, tax?

behaviorkeltonSeptember 11, 2009

I've purchased a bit of gold/silver bullion (looks like coins).

It occurred to me that it could have the advantage of a kind of tax free investment... but is it illegal?


I buy an Oz of gold for 950. It goes up to 1,200.

A neighbor says he'll cut down a couple of my trees for $1,200.

He accepts the gold coin at it's current value of 1,200.


Would this technically be something I need to report? Who would know?


We buy ROTHs/IRA's because we don't pay taxes on the investments as the grow (if they grow).

So let's say you think precious metal is a great investment and that's where you invest...but not in an IRA... you just buy it and put it in the closet.

The stuff goes up in value with each passing year. Who's gonna ask you to pay taxes on it? It seems to me that it has this odd way of acting like an IRA in that sense.

Is anyone ever, at any time at all, going to say, "hey dude, we know you bought that metal... what ever happened to it?".

What if I just give one of the coins to a nephew? Do I have to inform somebody?

I have yet to find an answer on this matter.


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Well this guy tried it. It didn't work out to well for him. I would expect to have to claim the prfofit made when the gold is sold or traded but I'm not a tax consultant.

Here is a link that might be useful: Story

    Bookmark   September 11, 2009 at 8:49PM
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Thanks... pretty interesting story, although this guy was doing real business with millions of dollars in metals.

256 possible years in jail? wow!

    Bookmark   September 11, 2009 at 8:55PM
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How about in two years the value is $700 or less, how do you take the loss.

Checking the historic price of gold I think that will be more realistic.

    Bookmark   September 11, 2009 at 11:15PM
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You could certainly be correct. In fact, I hope you are!

I do have traditional investments, but frankly I am more worried about them than I am about precious metals. Well, actually, I'm more worried about the value of my cash savings than anything else. Inflation, when it hits, could really negate much of my somewhat spartan living discipline.

Back in 2002, I asked a financial adviser about gold and he thought it was laughable. I simply noticed that gold was at historic lows and thought, "How much lower could it go???". So I missed it at $270/oz.

I'm keep diversity in my portfolio, but the actions with all the money printing going on are good reason for concern.

    Bookmark   September 12, 2009 at 8:19AM
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Actually, hyperinflation is good for stocks and lousy for bonds. And yes, you are supposed to report any barter exchange, although the IRS has never been successful in taxing non-cash transactions.

You might find this excerpt from a recent Jason Zweig column in the WSJournal an interesting opinion on what to do in a falling dollar environment. He says he keeps 50% of his equities in international stocks/fund, which is pretty aggressive but has worked for him. I personally will fluctuate from between 25-45% international equities in our stock allocation portion of the portfolio, depending on the current financial environment:

"As for gold and other commodities, they have provided an average return of around 20% in the four quarters following the worst drops in the value of the dollar, according to Michele Gambera, chief economist at Ibbotson Associates.

Surprisingly, these glittering returns look tarnished next to those of stocks and foreign bonds. On average, based on more than 20 years of returns, Mr. Gambera found that in the four quarters following the steepest declines in the dollar, U.S. stocks go up 25%, various baskets of international bonds gain between 21% and 28%, and non-U.S. stocks go up more than 56%.

So, with many commodities near record highs, there may be no need to join the stampede into gold or most other hard assets.

If the dollar keeps dropping, stocks and bonds priced in euros, yen, rubles or shekels will tend to become more valuable; anything denominated in foreign currency will then buy more dollars. That's why, for U.S.-based investors, international stocks and bonds tend to outperform commodities when the buck falls. Global diversification thus provides an automatic buffer against a dollar drop, unless the fund managers have hedged the holdings back into U.S. currency.

By the same token, big American companies that earn much of their revenues outside the U.S. may do better as the dollar drops; kronor and rupees will then convert into a greater number of greenbacks, putting more profit in U.S. shareholders' pockets.

But raising your overseas holdings can make sense even if the dollar stops falling. U.S. stocks represent less than half of the total value of equities world-wide, and yet American investors keep more than 70% of their stockholdings here at home. Although roughly two-thirds of the world's debt is outside the U.S., American investors have less than 4% of their fixed-income portfolios in foreign bonds."

    Bookmark   September 12, 2009 at 1:23PM
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thanks jkom,

Peter Schiff has gained some of my attention which explains why I took an interest in metals. I have also put some investment in the currencies of other countries as well as commodities... all of this constitutes maybe 20% of my investment money.

Gold/silver does a trick that other investments don't quite do. For instance, you actually get a real thing when you buy the stuff...and the stuff has actual value without depending on the stability of currency, stocks, committees, or political systems. It sounds a bit strange to say that, but I like this feature.

I haven't quite gone full tilt in the direction of Peter Schiff's recommendations, but I am considering it.


    Bookmark   September 12, 2009 at 1:49PM
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And regarding the "stampede into gold", I'm not seeing it.

Surely more people have taken notice of it, and many more have begun to buy it. However, I know of only one person personally who has purchased the stuff.

When real estate was booming, I knew plenty of people buying houses on speculation or otherwise buying overpriced houses with weird financing.

If there is anything close to a "stampede", I would expect gold to skyrocket. That's an easy guess. There simply isn't enough to satisfy even a mini-fad of gold ownership worldwide.

    Bookmark   September 12, 2009 at 9:37PM
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Advertisers aren't running all those commercials about buying gold for nothing, I think it is going to go up. Here is more news that supports my reasons for thinking so:

Hong Kong recalls gold reserves, touts high-security vault
- MarketWatch

Hong Kong is pulling all its physical gold holdings from depositories
in London, transferring them to a high-security depository newly built
at the city's airport, in a move that won praise from local traders

The facility, industry professionals said, would support Hong Kong's
emergence as a Swiss-style trading hub for bullion and would lessen
London's status as a key settlement-and-storage center.

More reasons why:

Gold Breaks $1,000 an Ounce; WhatâÂÂs Next â¦
by Claus Vogt 09-09-09

Numerous fundamental factors all but guarantee higher gold prices.
* As a consequence of the current financial and economic crisis government debt is going through the roof �" not just in the U.S., but all over the world.

* Worldwide central banks are printing money like there is no tomorrow.

* Gold demand is rising due to rising wealth in emerging economies where the yellow metal is still favored as a store of value.

* Gold supply is stagnating or even slightly shrinking �" despite the metalâÂÂs price rise since 2001. This is because itâÂÂs getting ever more difficult and expensive to get gold out of the earth.

* Finally, central bankers who were very eager to sell government gold at much lower prices a few years ago are getting increasingly reluctant to keep doing so. Emerging market central banks are even buying.

So with this important technical breakout now behind us, and these fundamentals in place, I expect the long-term bull market to continue. Much higher highs are very likely."

Links that might be useful:

    Bookmark   September 14, 2009 at 8:15PM
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Well, HK has to do something to reinvent itself as more and more stock business begins to move through the Shanghai Exchange. They're direct competitors; it only makes sense for HK to do something different because they're not going to win against the Chinese government which backs the Shanghai index. The most HK can do is aim towards different market sectors.

Gold does go up, but it also goes down very fast. Like all commodities, it's a wild ride over time. As long as you are willing to live with the risk, it's fine.

However, I remember the last time someone I knew actually bought gold because of all the doomsday scenarios being trumpeted. He bought at $350/oz, then again at $450, then again at $650.

This was back in 1978, BTW. Frankly, he made a lot more money over the same 30 years by building a house that year and then selling it at the top of the market in 2005. His ROI was over 7x his original investment, way better than the gold has managed even to this day, or probably for the next year.

    Bookmark   September 15, 2009 at 12:17PM
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