Year end tax season and precious metals

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Published : November 15th, 2017
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Category : Invest

We are now close to the end of the year where people adjust portfolios with taxes in mind. For securities there is a “wash rule” provision not allowing the repurchase of the same security for 30 days. Otherwise in the case of a loss, the loss will be disallowed and cannot be used against gains to lower your taxes.

This is not the case in commodities. Physical gold and silver are considered “commodities” for tax purposes and are not subject to the 30 day wash rule. Miles Franklin has solicited legal opinion on this but as with any tax question, you should contact your own accountant or tax lawyer.

Since gold and silver are not under the 30 day wash rule, it does offer up a unique situation. If you have losses in gold or silver bullion and would like to take the loss for tax purposes but do not want to give up your position, we can help you with this. You can “swap” with Miles Franklin and lock both sides of the trade in at the beginning. In other words, you sell, and buy at the same time and thus do not give up your position.

There are physical mechanics to this and it is not just a paper accounting. You must ship your metal to Miles Franklin, they will ship your metal back to you the following day. This must be done so that ownership clearly changes hands and a paper trail of custody change occurs so you can show if you are ever audited. There is a cost for you to do this. You will be required to ship the metal and to prepay for shipping back to you. There is also a 2% transaction charge that applies.

This strategy works in the case of “bullion” (eagles, maples, etc.) but works even better in the case of numismatics because you are receiving the same coins back that you originally sent. In the past, some numismatics were bought with 70-80% premiums to spot or even more. For example, when gold was trading at $1,700-$1,900, it was not uncommon to see MS 63 Libs or Saints change hands well over $2,500. Now, they trade at roughly only 10% over spot. You can swap these now at wholesaler “bid” prices in order to take the maximum tax loss possible and still have your same coins returned to you!

In the case of “bars”, we can ship your bars back to you but now is a great opportunity to change your bars into either bullion or numismatics. Whether you have 1, 10, 100, or even 1,000 ounce bars, it is the poorest form of ownership (other than “paper” obviously). In a barter situation, I would personally hesitate more accepting a bar versus a coin because they are much more easily counterfeited. In the case of a sealed and graded pre 1933 coin, counterfeits have almost never been found. Also, bars will never, ever accrue “premium” whereas certain coins available today and close to bar prices have had significant premiums in the past and highly likely will again in the future. All I am saying is this, if you own metal in bar form, it is THE worst form of ownership and changing into coin form has never been more economical than currently because premiums are the lowest they have ever been!

While I illustrated above using gold, if you hold silver or any other metal such as platinum, palladium, or even rhodium, they can be used in this swap technique also. If you are interested and would like to look into this further, please contact me at bholter@hotmail.com or Miles Franklin at 800-822-8080. The strategy for tax year 2017 is available until Dec. 29 as that is the last business day of the year.

Standing watch,
Bill Holter
Holter-Sinclair collaboration
bholter@hotmail.com

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Andrew Hoffman was a buy-side and sell-side analyst in the United States (including six years as an II-ranked oilfield service analyst at Salomon Smith Barney), but since 2002 his focus has been entirely in the metals markets, principally gold and silver. He recently worked as a consultant to junior mining companies, head of Corporate Development, and VP of Investor Relations for different mining ventures, and is now the Director of Marketing for Miles Franklin, a U.S.-based bullion dealer.
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