Gold Taxes

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Gold Taxes: Reporting Requirements for Bullion Transactions

There are two circumstances in which precious metals dealers are obligated to report consumer transactions to the IRS:

1. when a consumer sells reportable quantities of specific bullion or coins; and

2. when a consumer buys goods from a dealer and pays $10,000 or more in cash for the goods.

When a consumer sells a reportable gold taxable quantity of specific bullion or coins, precious metals dealers are required to file Form 1099-B with the IRS. Failure to follow reporting requirements can result in the IRS issuing monetary fines, or even criminal charges against both the precious metal dealer and the customer.

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Form 1099-B

The 1099 series is a set of forms used to report various types of income other than wages, salaries, and tips.

Form 1099-B (Proceeds from Broker and Barter Exchange Transactions) is the IRS form that lists gains or losses for certain kinds of consumer transactions.

They allow the IRS to prevent tax evasion by keeping track of individuals who may be selling assets as a source of income. In the context of precious metal transactions, dealers are required to fill out a Form 1099-B when a customer sells them any of the products mentioned in the IRS’s Reportable Items List according to the predetermined reportable quantities.

The reporting criteria vary according to the particular coin or bullion piece sold.

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Bars and Rounds

The reporting criteria for bars and rounds sales are primarily determined by the purity and the quantity of the individual products. However, these criteria differ for each kind of precious metal.

> For sales of gold bars and rounds to be considered reportable, every individual piece of bullion must have a fineness of at least .995 and the total purchase quantity must be 1 kilo (32.15 troy ounces) or more.

> Similarly, for sales of silver bars and rounds to warrant reporting, each silver piece needs to possess a fineness of at least .999 with a total purchase quantity of 1,000 troy ounces or more.

> Lastly, sales of palladium and platinum bars or rounds require the smallest qualifying quantities of 100 troy ounces and 25 troy ounces, respectively. The fineness restriction for both metals is .9995.

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Coins

The reporting criteria for coin sales are straightforward and the restrictions specific. There are only a few coins that are required to be reported to the IRS.

Reportable gold taxes on coins include the following:

1 oz Gold Maple Leaf (minimum of 25 coins)

1oz Gold Krugerrand Coins (minimum of 25 coins)

1 oz Gold Mexican Onza (minimum of 25 coins)

US coin composed of 90% silver (i.e., pre-1964 silver coins)

Exempt from reporting bullion products, regardless of the quantities that a customer sells include, but are not limited to:

Gold coins with fractional denominations

Gold or Silver American Eagle Coins

Any pieces of foreign currency that were not explicitly mentioned in the IRS’s Reportable Items List

Pieces of US currency were created subsequent to the list’s creation in the 1980’s.

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Capital Gains Tax

The IRS considers any profits a customer gains through the sale of their precious metal assets is taxable and is subject to “capital gains” taxes.

“Capital gains” refers generally to any profits that resulted from the sale of property or an investment.

In terms of precious metals, capital gains occur when a particular coin or bullion piece increases in value after the initial purchase and is then sold at a higher price.

“Buy low; Sell high”

Any such profits are subject to either a short-term or long-term capital gains tax, depending on how long the asset was held prior to sale.

If you owned the gold for less than a year, you pay a short-term capital gains tax. The tax rate is exactly the same as whatever income tax rate you file at. If you owned the gold for more than a year, you pay a long-term capital gains tax.

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Revenue Code Section 1031

Generally, if you make a like-kind exchange, you are not required to recognize a gain or loss under Internal Revenue Code Section 1031.

To report a like-kind exchange, taxpayers must file Form 8824, Like-Kind Exchanges, with their tax return for the year they transfer property as part of a like-kind exchange.

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Bottom line

You can trade an unlimited amount of gold and not pay the tax when using the self-directed retirement account. Or, you can delay the gold taxes with the 1031 IRS exchange, if applicable to your situation. Otherwise, the Internal Revenue Service (IRS) requires dealers to report your physical gold sales on Form 1099-B.

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