IAU Taxes w/Fidelity and TurboTax

Discussion of the Gold portion of the Permanent Portfolio

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Tyler
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Re: IAU Taxes w/Fidelity and TurboTax

Post by Tyler » Tue Jan 07, 2020 10:06 pm

era wrote:
Tue Jan 07, 2020 9:56 pm

I had a quick follow up question regarding this - how are the small transactions reported? Are they little capital gains (i.e. on the 1099)? If so, if the price of gold goes up and down throughout the year, do some of the gains/losses cancel each other out?
Yes, that's exactly how it works. Basically, each lot sells off a small fractional amount every month and the proceeds are tracked against the cost basis. In 2018 I had a bunch of gains/losses for pennies each that added up to a net long term loss of a few dollars. It would be a real pain if I had to enter all of that manually, but Turbotax imported it all automatically and it was not a big deal.
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era
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Re: IAU Taxes w/Fidelity and TurboTax

Post by era » Thu Jan 09, 2020 12:13 pm

Tyler wrote:
Tue Jan 07, 2020 10:06 pm
era wrote:
Tue Jan 07, 2020 9:56 pm

I had a quick follow up question regarding this - how are the small transactions reported? Are they little capital gains (i.e. on the 1099)? If so, if the price of gold goes up and down throughout the year, do some of the gains/losses cancel each other out?
Yes, that's exactly how it works. Basically, each lot sells off a small fractional amount every month and the proceeds are tracked against the cost basis. In 2018 I had a bunch of gains/losses for pennies each that added up to a net long term loss of a few dollars. It would be a real pain if I had to enter all of that manually, but Turbotax imported it all automatically and it was not a big deal.
OK, thank you, this is very helpful. I have a couple other questions if thats okay.

Are the individual sales tracked throughout the year somewhere on your Fidelity account? In other words, for example in my Vanguard account, I can go to the tax center any time through the year and look at my "realized capital gains" for the given year. Or do they just come out at the end of the year? If so, are the transactions obvious what they are somewhere in the Fidelity dashboard - or is it not until they get uploaded to TurboTax that they are obvious?

Thanks for the help again.- I am debating opening up a brokerage account with Fidelity just for purpose of taking a position in gold via IAU, I currently use Vanguard for equities via VTSAX.
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Re: IAU Taxes w/Fidelity and TurboTax

Post by pugchief » Thu Jan 09, 2020 12:16 pm

I am a fan of Fidelity, but why can't you just buy IAU in your Vanguard account? There is now no commissions there either.
era
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Re: IAU Taxes w/Fidelity and TurboTax

Post by era » Thu Jan 09, 2020 3:05 pm

pugchief wrote:
Thu Jan 09, 2020 12:16 pm
I am a fan of Fidelity, but why can't you just buy IAU in your Vanguard account? There is now no commissions there either.
I would definitely prefer that - but based on this thread:
https://www.bogleheads.org/forum/viewto ... 0&t=250680

It does not appear that Vanguard handles gold ETF expense transactions properly.
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Re: IAU Taxes w/Fidelity and TurboTax

Post by Tyler » Thu Jan 09, 2020 4:25 pm

era wrote:
Thu Jan 09, 2020 12:13 pm
Are the individual sales tracked throughout the year somewhere on your Fidelity account? In other words, for example in my Vanguard account, I can go to the tax center any time through the year and look at my "realized capital gains" for the given year. Or do they just come out at the end of the year? If so, are the transactions obvious what they are somewhere in the Fidelity dashboard - or is it not until they get uploaded to TurboTax that they are obvious?
I don't see them in my tax info right now, but I can absolutely see them in my archived final tax statements. Compiling all of that info actually takes a little time for Fidelity, so the final tax info is delayed every year until February or March. If you're the type that wants to do your taxes early, it might be a pain. But if you're patient it's no big deal.
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era
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Re: IAU Taxes w/Fidelity and TurboTax

Post by era » Thu Jan 09, 2020 4:33 pm

::)
Tyler wrote:
Thu Jan 09, 2020 4:25 pm
era wrote:
Thu Jan 09, 2020 12:13 pm
Are the individual sales tracked throughout the year somewhere on your Fidelity account? In other words, for example in my Vanguard account, I can go to the tax center any time through the year and look at my "realized capital gains" for the given year. Or do they just come out at the end of the year? If so, are the transactions obvious what they are somewhere in the Fidelity dashboard - or is it not until they get uploaded to TurboTax that they are obvious?
I don't see them in my tax info right now, but I can absolutely see them in my archived final tax statements. Compiling all of that info actually takes a little time for Fidelity, so the final tax info is delayed every year until February or March. If you're the type that wants to do your taxes early, it might be a pain. But if you're patient it's no big deal.

Thank you for the quick and detailed response. Very helpful.
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Re: IAU Taxes w/Fidelity and TurboTax

Post by pugchief » Thu Jan 09, 2020 7:23 pm

era wrote:
Thu Jan 09, 2020 3:05 pm
pugchief wrote:
Thu Jan 09, 2020 12:16 pm
I am a fan of Fidelity, but why can't you just buy IAU in your Vanguard account? There is now no commissions there either.
I would definitely prefer that - but based on this thread:
https://www.bogleheads.org/forum/viewto ... 0&t=250680

It does not appear that Vanguard handles gold ETF expense transactions properly.
I read thru that BH thread. Without actually seeing the 1099s and whatnot that people are talking about it's hard know with 100% certainty, but I am pretty sure the problem is not Vanguard or Fidelity, but the person receiving the report not understanding what it is or what to do with it.

I hold gold ETFs thru several different brokerages (although not Vg or Fido), and they all do the same thing on the 1099. What you are seeing reported is the micro-sale of shares that took place during the year to cover expenses. This is for informational purposes only; you don't have to report anything on your taxes until you sell shares. These micro-sales reduce your cost basis in the lot. The math is complicated when you sell, but this information is reported to all brokers the same way (from the fund sponsors at IAU, GLD, etc) each January, so it shouldn't matter what broker you buy from. The only way to avoid it is to hold in a tax-deferred account. Since record keeping has improved immensely due to IRS requirements, when you do sell, the broker should report the adjusted cost basis in the year of the sale so that you hopefully won't have to do the calculations yourself. Of course, YMMV.
era
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Re: IAU Taxes w/Fidelity and TurboTax

Post by era » Thu Jan 09, 2020 8:20 pm

So you do not need to pay capital gains tax on the micro sale in the year they happen? Is that a special rule for these types of capital gains?
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Re: IAU Taxes w/Fidelity and TurboTax

Post by Xan » Thu Jan 09, 2020 8:36 pm

I'm with era, Pug, I'm not sure that makes sense.

I've held IAU in taxable with Ameritrade and have never received information about these microtransactions from them. This is the first I'm hearing that other brokers do it.

To be honest I've always figured it was de minimus and could be ignored. So that's how I've played it. Since I do my taxes manually (basically), if I were to switch brokerages and potentially end up with a million different taxable events, that would be a big pain.
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Re: IAU Taxes w/Fidelity and TurboTax

Post by pugchief » Thu Jan 09, 2020 9:16 pm

Xan wrote:
Thu Jan 09, 2020 8:36 pm
I'm with era, Pug, I'm not sure that makes sense.

I've held IAU in taxable with Ameritrade and have never received information about these microtransactions from them. This is the first I'm hearing that other brokers do it.

To be honest I've always figured it was de minimus and could be ignored. So that's how I've played it. Since I do my taxes manually (basically), if I were to switch brokerages and potentially end up with a million different taxable events, that would be a big pain.
Here is the information GLD provides to its shareholders regarding the micro-sales.
https://www.spdrgoldshares.com/media/GL ... n-2017.pdf

I also have some IAU and GLDM at Ameritrade, and this information was reported on my 1099B near the end.
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era
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Re: IAU Taxes w/Fidelity and TurboTax

Post by era » Thu Jan 09, 2020 9:56 pm

"Consult with your tax advisor regarding proper treatment"

Tyler - For fidelity, do they assume "proper treatment" is capital gains taxed at the commodities rate? (Asking since it appears your account does the most things "automatically", probably because iShares and Fidelity have an arrangement together I believe.)

On the other hand it does say this in the link:
Because the Trust sold only a de minimis amount of gold for payment of Trust expenses during the year
and made no distributions of sale proceeds to its Shareholders, under Treas. Reg. Sec. 1.671-
5(c)(2)(iv)(B) neither the Trust nor brokers are required to report the gross proceeds of Trust sales to
Shareholders on Form 1099B. Certain brokers may nevertheless elect to report these proceeds to their
customers on a composite Form 1099B.
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Re: IAU Taxes w/Fidelity and TurboTax

Post by Tyler » Thu Jan 09, 2020 10:49 pm

era wrote:
Thu Jan 09, 2020 9:56 pm
Tyler - For fidelity, do they assume "proper treatment" is capital gains taxed at the commodities rate? (Asking since it appears your account does the most things "automatically", probably because iShares and Fidelity have an arrangement together I believe.)
I haven't personally had a net taxable capital gain on gold in a while. But both Fidelity and Turbotax are very thorough so I have no reason to doubt their calculations.
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