Reporting Overseas Gold? I dont think IRS can require this...

Discussion of the Gold portion of the Permanent Portfolio

Moderator: Global Moderator

MiniB

Reporting Overseas Gold? I dont think IRS can require this...

Post by MiniB » Wed Sep 22, 2010 1:19 am

If Gold is NOT a currency, and thus subject to 28% collectibles tax, then how can the IRS require disclosing offshore accounts that solely hold gold?
User avatar
craigr
Administrator
Administrator
Posts: 2544
Joined: Sun Apr 25, 2010 9:26 pm

Re: Reporting Overseas Gold? I dont think IRS can require this...

Post by craigr » Wed Sep 22, 2010 2:04 pm

Any foreign account with holdings worth more than $10k USD needs to be reported annually both on the 1040 and the treasury FBAR form separately. Not doing so is a serious offense punishable by steep fines and possible prison time.   
MiniB

Re: Reporting Overseas Gold? I dont think IRS can require this...

Post by MiniB » Wed Sep 22, 2010 6:51 pm

I dont understand what is meant by $10k?  If I am holding 100 ounces of gold, is that more than $10k?

What if I store a picasso painting in a villa in France worth $10M.  Do I need to report my painting as an overseas holding?

If gold is taxed as a collectible then it is a collectible, and shouldnt be considered under duty to report foreign cash holdings.
User avatar
craigr
Administrator
Administrator
Posts: 2544
Joined: Sun Apr 25, 2010 9:26 pm

Re: Reporting Overseas Gold? I dont think IRS can require this...

Post by craigr » Thu Sep 23, 2010 4:11 am

First, if you sold your painting for a profit it would certainly qualify as taxable income. So even artwork is taxable.

Also, do a search for the Treasury department FBAR form. A "financial account" as defined by the IRS is very broad and can mean many things. Here are some excerpts from the form:
Who Must File this Report. Each United States person who has a financial interest in or signature or other authority over any foreign financial accounts, including bank, securities, or other types of financial accounts, in a foreign country, if the aggregate value of these financial accounts exceeds $10,000 at any time during the calendar year, must report that relationship each calendar year by filing this report with the Department of the Treasury on or before June 30, of the succeeding year.
Financial Account. This term includes any bank, securities, securities derivatives or other financial instruments accounts. Such accounts generally also encompass any accounts in which the assets are held in a commingled fund, and the account owner holds an equity interest in the fund (including mutual funds). The term also means any savings, demand, checking, deposit, time deposit, or any other account (including debit card and prepaid credit card accounts) maintained with a financial institution or other person engaged in the business of a financial institution.
Financial Interest. A financial interest in a bank, securities, or other financial account in a foreign country means an interest described in one of the following three paragraphs: 1. A United States person has a financial interest in each account for which such person is the owner of record or has legal title, whether the account is maintained for his or her own benefit or for the benefit of others including non–United States persons.
Signature or Other Authority Over an Account. A person has signature authority over an account if such person can control the disposition of money or other property in it by delivery of a document containing his or her signature (or his or her signature and that of one or more other persons) to the bank or other person with whom the account is maintained.
Provide the maximum value of the account during the calendar year being reported. The maximum value of an account is the largest amount of currency or non-monetary assets that appear on any quarterly or more frequent account statement issued for the applicable year.
The above would read to any tax attorney worth their training to mean accounts that hold gold bullion. Any attorney claiming otherwise I would probably fire.

From the FAQ at the IRS:
Q. Is an FBAR required for accounts maintained with financial institutions located in a foreign country if the accounts hold noncash assets, such as gold?

A. Yes. An account with a financial institution that is located in a foreign country is a financial account for FBAR purposes whether the account holds cash or non-monetary assets.

(emphasis added)

Realize that much that has been written on foreign accounts in the past has been made completely obsolete by law changes the past five or so years. You are welcome to not declare an account, but realize that the IRS is going to decide what qualifies as a financial account and if they think you are hiding assets there are very stiff penalties:
Q. Can cumulative FBAR penalties exceed the amount in a taxpayer's foreign accounts?

A. Yes, under the penalty provisions found in 31 U.S.C. 5314(a)(5), it is possible to assert civil penalties for FBAR violations in amounts that exceed the balance in the foreign financial account.
And really even if they know you have an account there isn't much they can do about it. If they were stupid enough to try to grab gold in this country again you'd have a big advantage by not having it in the country and could stall. The main advantage of having money overseas is to not get roped into easily implemented capital controls such as the freezing of all national accounts like they did in Argentina in 2001 before devaluing the money. Having funds overseas gives an investor options that someone with all their money in-country won't have.

The FBAR form must be filed each year if you have signature authority on accounts worth more than $10K USD. Period. You also must indicate foreign accounts on the 1040. If you don't do this then you risk trouble from the IRS.
User avatar
smurff
Executive Member
Executive Member
Posts: 975
Joined: Mon Aug 16, 2010 2:17 am

Re: Reporting Overseas Gold? I dont think IRS can require this...

Post by smurff » Wed Oct 20, 2010 11:51 pm

Each US gold eagle coin also has a face value stamped on it, ranging from $5 for 1/10 oz up to $50 for 1 oz.  So do bullion coins from other nations, as Clive pointed out.  I think that covers the IRS if they decide to go after people with gold in accounts; the remaining issues would be the value of the account and what, specifically, the IRS would feel entitled to confiscate--a percentage of the market value of the coins, a percentage of the face value stamped on the coins, or some percentage of the specific coins in the account.  (Assuming the gold in the account consisted of bullion coins.)

Of course, I wonder whether gold (or any other money, including paper money) held overseas stacked and bundled in a safety deposit box could be regarded as an "account" for IRS purposes. 

There may be a rental account on the books of the bank for renting the box, but all kinds of things, with monetary and non-monetary value, may be kept in such a box for safekeeping.  Not only gold coins, for example, but also deeds, insurance documents, baby rattles, retirement documents, family photos, diamonds and other gemstones, etc. 
User avatar
BearBones
Executive Member
Executive Member
Posts: 689
Joined: Sat Sep 18, 2010 4:26 pm

Re: Reporting Overseas Gold? I dont think IRS can require this...

Post by BearBones » Mon Oct 25, 2010 12:31 pm

smurff wrote: Of course, I wonder whether gold (or any other money, including paper money) held overseas stacked and bundled in a safety deposit box could be regarded as an "account" for IRS purposes.
I question the same thing. I have combed the internet looking for FBAR reporting of safe deposit boxes (SDB), and I cannot find that this is mandated, unlike checking, money market, or mutual fund accounts. Several accountants and attorneys have commented on the subject, and their articles state either that tangible assets in a foreign SDB are exempt or that this specific issue has not been addressed.

Based on your comments above, Craigr, it seems that your interpretation is that assets stored in a foreign SDB should be reported. Am i correct in my understanding? Anyone else knowledgeable on this subject?
User avatar
craigr
Administrator
Administrator
Posts: 2544
Joined: Sun Apr 25, 2010 9:26 pm

Re: Reporting Overseas Gold? I dont think IRS can require this...

Post by craigr » Mon Oct 25, 2010 1:07 pm

BearBones wrote:
smurff wrote: Of course, I wonder whether gold (or any other money, including paper money) held overseas stacked and bundled in a safety deposit box could be regarded as an "account" for IRS purposes.
I question the same thing. I have combed the internet looking for FBAR reporting of safe deposit boxes (SDB), and I cannot find that this is mandated, unlike checking, money market, or mutual fund accounts. Several accountants and attorneys have commented on the subject, and their articles state either that tangible assets in a foreign SDB are exempt or that this specific issue has not been addressed.

Based on your comments above, Craigr, it seems that your interpretation is that assets stored in a foreign SDB should be reported. Am i correct in my understanding? Anyone else knowledgeable on this subject?
I don't know if safe deposit boxes qualify. I do know that if you have an account at a bank in excess value of $10K USD in a year you need to report it.
User avatar
BearBones
Executive Member
Executive Member
Posts: 689
Joined: Sat Sep 18, 2010 4:26 pm

Re: Reporting Overseas Gold? I dont think IRS can require this...

Post by BearBones » Sun Aug 19, 2012 10:01 am

Old post, but I thought worth revisiting since I found the following document:
http://www.irs.gov/businesses/article/0 ... 6,00.html/

My interpretation is that precious metals held directly and held overseas (such as gold in a vault or safe deposit box) are exempt from FBAR and Form 8939.

Anyone know otherwise, please post.
User avatar
craigr
Administrator
Administrator
Posts: 2544
Joined: Sun Apr 25, 2010 9:26 pm

Re: Reporting Overseas Gold? I dont think IRS can require this...

Post by craigr » Sun Aug 19, 2012 11:33 am

BearBones wrote: Old post, but I thought worth revisiting since I found the following document:
http://www.irs.gov/businesses/article/0 ... 6,00.html/

My interpretation is that precious metals held directly and held overseas (such as gold in a vault or safe deposit box) are exempt from FBAR and Form 8939.

Anyone know otherwise, please post.
If a bank or other institution is holding it for you, can go in and buy/sell the asset, and can also accept and receive funds to do these things then the gold is almost certainly reportable. And if not directly reportable, it's so much in the gray area that you'll have to do some fancy footwork in front of the tax judge to get them to buy your story if caught.

A safe deposit box may not be reportable, but I really don't know.

If you have any questions, please talk to a qualified tax professional about your situation. However it's safest to just report these things and then there is no worry about it.

Also I'd just suggest that unless you are involved in some kind of criminal enterprise, tax evasion, terrorism or other activity the various governments are not going to be interested in your overseas account. Certainly the idea that they are just going to reach in and take it with no cause is probably not true either. Not only are there domestic issues they'd have to face, but the overseas custodian is also going to have their own laws in place that won't simply allow such things to happen.

Again, if you're a drug runner or laundering money for terrorist purposes all bets are off and even supposed "havens" like Switzerland will freeze accounts involved in criminal activity (or even if a court is claiming you owe child support). So having an overseas account does not give anyone a pass to be a crook. But for an ordinary Joe this is not going to be an issue.
User avatar
BearBones
Executive Member
Executive Member
Posts: 689
Joined: Sat Sep 18, 2010 4:26 pm

Re: Reporting Overseas Gold? I dont think IRS can require this...

Post by BearBones » Sun Aug 19, 2012 5:19 pm

craigr wrote: If a bank or other institution is holding it for you, can go in and buy/sell the asset, and can also accept and receive funds to do these things then the gold is almost certainly reportable. And if not directly reportable, it's so much in the gray area that you'll have to do some fancy footwork in front of the tax judge to get them to buy your story if caught.
Certainly agree. But I am speaking solely of assets held in a foreign vault or safe deposit box.
craigr wrote: A safe deposit box may not be reportable, but I really don't know.

If you have any questions, please talk to a qualified tax professional about your situation. However it's safest to just report these things and then there is no worry about it.
I understand the disclaimer. But the vast majority of folks who might keep gold in a foreign vault or safe deposit box (especially those cautious, libertarian-leaning, HB-reading folks on this site) have no illegal intent, IMO. I will check with my accountant, but from what I can see, it is no safer reporting non-financial assets than it is in doing so. The referenced document indicates that the following are not reported on either form 8398 or FBAR: "Foreign currency held directly, precious metals held directly, personal property, held directly, such as art, antiques, jewelry, cars and other collectibles."
User avatar
craigr
Administrator
Administrator
Posts: 2544
Joined: Sun Apr 25, 2010 9:26 pm

Re: Reporting Overseas Gold? I dont think IRS can require this...

Post by craigr » Sun Aug 19, 2012 5:39 pm

BearBones wrote:I understand the disclaimer. But the vast majority of folks who might keep gold in a foreign vault or safe deposit box (especially those cautious, libertarian-leaning, HB-reading folks on this site) have no illegal intent, IMO. I will check with my accountant, but from what I can see, it is no safer reporting non-financial assets than it is in doing so. The referenced document indicates that the following are not reported on either form 8398 or FBAR: "Foreign currency held directly, precious metals held directly, personal property, held directly, such as art, antiques, jewelry, cars and other collectibles."
I understand. And perhaps if you travel to a foreign jurisdiction and place the contents in the box yourself it might not be reportable under the current rules. But logistically this is very difficult and expensive. Now, if you are using a service that is buying/selling the gold and storing it for you then please be aware that it probably is reportable even if just sitting in their vault. It would be considered a financial account.

I'd refer you to my post above quoting the FBAR FAQ which does in fact list out gold metal accounts as reportable.

And again keep in mind that the interpretation of these regulations is going to be done by the IRS and tax courts are much different in how they operate and place burden of proof. Keep that in mind when trying to navigate between the lines of these things. Even if you are right, it would likely be very expensive and time consuming to prove it when asked.

My recommendation is to report such accounts as required by law. If you are not involved in criminal enterprises/tax evasion there are not going to be any problems. But if you don't report and you are found deficient then there are huge fines that could be applied.
Last edited by craigr on Sun Aug 19, 2012 5:46 pm, edited 1 time in total.
User avatar
bronsuchecki
Full Member
Full Member
Posts: 78
Joined: Wed Nov 09, 2011 9:47 pm
Location: Perth, Western Australia
Contact:

Re: Reporting Overseas Gold? I dont think IRS can require this...

Post by bronsuchecki » Sun Aug 19, 2012 7:48 pm

There are a lot of "held directly" in that quote. It would certainly be in the Perth Mint's interest to argue otherwise but I think the meaning of "held directly" is you have direct control over the asset, which is why a safety deposit box would qualify as you hold the key. Allocated metal held by a custodian but where they can access it on your instruction I think qualifies as an account and is thus reportable.
Disclosure: I work for the Perth Mint. What I say is done in a personal capacity and is not endorsed by the Mint.
Post Reply