A Simple Strategy to Minimize Reporting on Gold Sales

By Kevin Brekke
An American's right to financial privacy is failing fast, not least with the approval of all sorts of new regulations over the past few years that make
virtually any asset held overseas reportable.
Of course, it's not only the "overseas" component of asset management that has received increased scrutiny - anything that can be traded
anonymously even within the US has become a target, including the sale of precious metals.
In fact, the sale of PMs to a dealer is now subject to a whole host of requirements including the collection of a driver's license and Social Security
number directly by the dealer, which is obviously subject to misuse or outright identity theft.
Thankfully, at least for now, there is a legal strategy one can follow to skirt the reporting requirements, as Kevin Brekke explains.
Gold and Silver Bullion and Form 1099B
Regular International Man readers are familiar with the ongoing assault on financial privacy being waged by the Treasury Dept, the IRS, and the
US Justice Dept here in the United States. Over the past two months, I have:
Covered the final ruling on amendments to the reporting requirements on Treasury From TD F 90-22.1, Report of Foreign Bank and
Financial Accounts (commonly referred to as the FBAR), and
Dissected the new IRS Form 8938, Statement of Specified Foreign Assets, that qualifying US taxpayers will be required to file for tax year
2011.
A Simple Strategy to Minimize Reporting on Gold Sales | International Man http://www.internationalman.com/articles/a-simple-strategy-to-minimize-reporting-on-gold-sales
1 of 3 2/16/2014 11:34 PM
Continuing down this path of ever-intrusive reporting requirements for US persons, we will take a look at the revised 1099B reporting regime and
how it specifically applies to the private sale of gold bullion.
The provision was initially buried inside the Obama administration's Patient Protection and Affordable Care Act - the "Healthcare Bill" - and drew
wide criticism from businesses and individuals from its inception.
As originally passed, the legislation would amend the Internal Revenue Code to expand the scope of form 1099 to include all purchases of goods
or services of $600 or higher. Prior to this new provision, a 1099 was used to report miscellaneous income and applied to a narrow slice of
taxpayers (typically independent contractors and the self-employed).
Among other objections, the new regulation would create a vast paperwork and bookkeeping burden and increase the cost of doing business.
Opposition to the regulation did not relent, and on April 14, 2011, the $600 reporting threshold was repealed. Congressional support of repeal
was high with sufficient votes to override a Presidential veto, and Obama signed the repeal.
New 1099B for 2012
However, for owners of gold and silver bullion the repeal was a small victory. Specifically, when gold and silver bullion are sold to a dealer, the
dealer is obligated to gather (under certain conditions) specific information about the seller, such as driver's license and social security numbers.
The collection of this type of personal seller information poses a major security risk if it is not adequately safeguarded by the dealer. Any
careless handling of this information - or a security breach where the information is stolen - will potentially expose the seller to personal risk. In
the wrong hands, this information could easily lead the thief to conclude that the seller has more metal in their possession and stored at home.
Aside from heightened personal security issues, the IRS has released guidelines that clarify which forms, weights, and quantities of gold and
silver bullion must be reported and which are exempt.
The good news is that there is a strategy that bullion buyers can employ that will exempt them from any reporting requirements when the metal is
eventually sold to a dealer. That assumes no further changes in reporting requirements - a mighty big assumption at this point.
Nevertheless, here is a reporting breakdown of private investor sales of bullion to a dealer:
A Simple Strategy to Minimize Reporting on Gold Sales | International Man http://www.internationalman.com/articles/a-simple-strategy-to-minimize-reporting-on-gold-sales
2 of 3 2/16/2014 11:34 PM
Gold
US Gold Eagle and US Gold Buffalo coins, all weights, are not reportable for any quantity.
Foreign coins sold in quantities of 25 ounces or more are reportable. Foreign coins include, but are not limited to: South African
Krugerrands, Austrian Philharmonics, Chinese Pandas, Canadian Maple Leafs, British Sovereigns, etc.
Fine bars sold in weights of one kilo (32.15 troy ounces) or more per transaction are reportable.
Silver
Bullion coins sold in any quantity are not reportable. Examples include, but are not limited to: Mexican Libertade, US Eagles, Austrian
Philharmonic, Canadian Maple Leaf, etc.
Bullion bars and rounds, .999 fine, sold in weights of 1,000 ounces or more per transaction are reportable.
Junk bags of 90% coins, $1,000 face value or greater sold in a single transaction are reportable.
As outlined here, a gold and silver bullion investor can avoid any 1099B reporting requirements by simply pursuing a buying strategy of coins that
are exempt. We must add a note of caution: arranging the sale of bullion in multiple transactions to skirt the reporting requirements will expose
the seller to further scrutiny and possible prosecution. A dealer that determines a seller is using a pattern of sales to avoid 1099B reporting is
required to file a Suspicious Activity Report.
Caveat venditor.
comments powered by Disqus
A Simple Strategy to Minimize Reporting on Gold Sales | International Man http://www.internationalman.com/articles/a-simple-strategy-to-minimize-reporting-on-gold-sales
3 of 3 2/16/2014 11:34 PM