Financial Strategist Says Gold May Face Higher Taxation in Future

Adding to the confusion of extensive tax laws is the fact that they change, says gold financial strategist William A. Storum.

In 2013, for example, new tax laws moved the highest federal income tax rate from 35 percent to 39.6 percent. For 2014, if your taxable income topped $406,750 – or $457,600 if you’re married and file a joint return – you are in that 39.6 percent.

“Whether you’re in that percentile or not, inflation is an inevitable part of our future because the government is printing money it doesn’t have, affecting every American,” says Storum, author of “Going for the Gold” (www.goldandtax.com).

“Gold is the standard, and that’s why it’s a great investment for your portfolio assets – anywhere from 5 to 35 percent is a good range.”

But gold investments may be highly taxed in the future, which is why you’ll need a tax-planning strategy.

Saving plans for gold investments

In trying to navigate stocks, mutual funds and various tax traps for gold, such a strategy likely requires a comprehensive and highly detailed plan, says Storum, who offers a few basic tips for gold coins and bars.

  • Trading with like-kind exchanges : As many real estate investors know, like-kind exchanges mean that an owner can exchange one investment property for another and thus avoid paying tax on a sale. Like-kind exchanges are also possible for gold investors. You can exchange bullion – coins or bars – for another form, and as long as equal value changes hands, no income tax will be due. Why trade? One reason may be to obtain smaller, more liquid gold items. A one-ounce gold bullion coin worth $1,400 or more may not be practical for purchases or gifts.
  • Privacy protection: Unlike gold stocks, funds and other similar securities investments, the purchase of gold bullion often is not reported to the IRS. No government agency is able to keep track. For the most part, investors in gold coins and bars, and other precious metals, have a great deal of privacy – if you know the rules and understand when forms must be filed. It’s important to work with a dealer who is in compliance with reporting regulations. The IRS may scrutinize dealers and their customers if their compliance is in question.
  • Helping loved ones: Many people today are still not making what they used to, and finding a job right out of college is still challenging for many recent grads. Instead of giving cash to your child, consider giving an appreciated gold coin, which can be sold to pay the mortgage, pay property taxes, buy food, etc. In times of financial distress, your child may be in a low tax bracket – perhaps a 0 percent bracket – and thus would owe much less tax than you probably would pay if you sold the coin yourself. However, due to the so-called kiddie tax, this strategy won’t work as well with children who are fulltime students younger than 24.

About William A. Storum

William A. Storum, JD, is a member of the California Bar Association (inactive) and a licensee (inactive) of the California Board of Accountancy. He has extensive experience in individual, corporate, real estate and partnership taxation and has represented clients in tax audits and other tax matters with the IRS. As an investor, Storum came to understand the need to own gold in order to preserve wealth from the government’s reach. He wrote “Going for the Gold” (www.goldandtax.com) in an effort to clarify widespread confusion about investment in and taxation on gold. Storum graduated cum laude from the University of Santa Clara with a bachelor’s degree in accounting with a minor in economics, and from the University of Santa Clara School of Law, cum laude.

Three Tax Saving Plans For Gold Investments