Tax loss harvesting physical gold

[sophie]

I'm gathering up my gold coins and planning to sell, then re-buy in order to take advantage of the ~25% price drop.  Anyone think this isn't the right time to do it??  Has anyone considered selling physical gold to harvest losses, or done so yet?  Do you have to have the coins assayed before selling, or is that typically incorporated into the sell price?  Also any particular recommendations for dealers?  I can't use Colorado Gold since they only buy back coins they sell you.  I was planning to compare prices at Goldmart, Apmex, Gainesville Coins, and A-mark Precious Metals (Colorado Gold's bullion source).

Also, the 31 day waiting period to buy back is going to be kind of an itchy time.  I thought about buying a gold ETF for just a month, but the fees and annoyance don't seem worthwhile.

[dualstow]

I'm gathering up my gold coins and planning to sell, then re-buy in order to take advantage of the ~25% price drop.  Anyone think this isn't the right time to do it?? 
...
Also, the 31 day waiting period to buy back is going to be kind of an itchy time.  I thought about buying a gold ETF for just a month, but the fees and annoyance don't seem worthwhile.

I think the month of waiting is what I worry about the most, far more so with gold and its volatile swings than with the stock market, or even many individual stocks. What if it goes up $100 right after you sell?

The other thing is the markup on gold coins which I'm still getting used to, having come from a Boglehead philosophy of low-cost investing. You have an aversion to ETF fees, Sophie, but you don't mind paying a dealer to trade coins twice in two months? I hope you have a good dealer, ie a low premium. For me, the beauty of gold coins is what Medium Tex and others have pointed out -- once you pay that markup, you don't have to pay again...as long as you don't keep trading.

But, I expect you're going to say the tax break more than makes up for it?

[Libertarian666]

I had a similar situation last year where I had to be out of gold for a few weeks (although not for tax loss harvesting). I bought SGOL to cover the time when I was out. It turned out that I would have done a bit better not to bother, but I did not want to get caught on the wrong side of a big move.

[sophie]

I think the month of waiting is what I worry about the most, far more so with gold and its volatile swings than with the stock market, or even many individual stocks. What if it goes up $100 right after you sell?

The other thing is the markup on gold coins which I'm still getting used to, having come from a Boglehead philosophy of low-cost investing. You have an aversion to ETF fees, Sophie, but you don't mind paying a dealer to trade coins twice in two months?...

But, I expect you're going to say the tax break more than makes up for it?

I also would like life to be simpler, but alas, the tax break on a 25% gold plunge is substantial.  According to the Colorado Gold website, the spread on 1 oz gold Eagles is 1.8%.  At a federal + state + city tax rate of 39%, the deal will net me almost 8% of the original value of the coins, or more than 18% of the current value.  That is hard to ignore.

I'm also very concerned about the possibility of gold going up substantially during the waiting period.  Buying a gold fund for 31 days gets around that problem and will add $16 to the cost of the whole deal, which I guess isn't worth breaking a sweat about.  A gold ETF should be sufficiently different from gold coins that the IRS won't complain...correct??

[Libertarian666]

I think the month of waiting is what I worry about the most, far more so with gold and its volatile swings than with the stock market, or even many individual stocks. What if it goes up $100 right after you sell?

The other thing is the markup on gold coins which I'm still getting used to, having come from a Boglehead philosophy of low-cost investing. You have an aversion to ETF fees, Sophie, but you don't mind paying a dealer to trade coins twice in two months?...

But, I expect you're going to say the tax break more than makes up for it?

I also would like life to be simpler, but alas, the tax break on a 25% gold plunge is substantial.  According to the Colorado Gold website, the spread on 1 oz gold Eagles is 1.8%.  At a federal + state + city tax rate of 39%, the deal will net me almost 8% of the original value of the coins, or more than 18% of the current value.  That is hard to ignore.

I'm also very concerned about the possibility of gold going up substantially during the waiting period.  Buying a gold fund for 31 days gets around that problem and will add $16 to the cost of the whole deal, which I guess isn't worth breaking a sweat about.  A gold ETF should be sufficiently different from gold coins that the IRS won't complain...correct??

I am not a lawyer, tax or otherwise, but I'm pretty sure that gold coins and a gold ETF would not trigger a wash sale. In fact, I don't think "collectibles" even fall under the wash sale rules at all, as they are not considered "securities".

But don't take my word for it; you should be able to find pretty good info on the web.

[dualstow]

...
I also would like life to be simpler, but alas, the tax break on a 25% gold plunge is substantial.  According to the Colorado Gold website, the spread on 1 oz gold Eagles is 1.8%.

FYI I just bought eagles for my dad today at ~1340 an oz. Spot was 1286.6. I see AJPM is selling at 1355.

[sophie]

In case anyone is interested in tax loss harvesting physical, you CAN buy the coins right back because the wash sale rules don't apply.  Gold coins are a collectible, not a security - and there's no ambiguity with that, unlike the situation with a gold ETF.

I did it through APMEX, and arranged the sell/buy transaction at exactly the same time so there's no problem with losing out because of price volatility.  They also apply the sale proceeds to the purchase directly, so there's no big bank transactions or wires to worry about. The person I talked to said a lot of people are doing this.  The spread was 3.5%, slightly better than most everywhere except Colorado Gold (who will only buy from you what they sold you).

The process was really very easy:  1) collect the coins and pack them in a small sturdy box, 2) call the company of your choice to lock in the sale & buy prices, 3) print voucher and add to the box, 4) send box registered and insured, 5) send check for the difference in buy/sell price, and 6) wait for your new coins to arrive.

If you have enough coins, this is completely worth it.  I probably have fewer than many on this forum and I'm going to net a very nice chunk of change, certainly more per unit time than I could get doing pretty much any other side job.  The worst part of the experience was mailing the box at the post office.  The clerk loudly announced to the crowded room the amount I was insuring it for, and then asked me what was in the box (after we'd already dealt with the hazardous item routine).  Makes you feel like a criminal for having physical possession of part of your wealth, which is how I know I'm on the right track!

[notsheigetz]

This is good go know. I'm thinking about just taking some coins up to the Gainesville coins showroom that's not too far away and see if they will buy them and sell them right back to me. It would be easy money for them so I don't know why they wouldn't unless there is something illegal about it.

In case anyone is interested in tax loss harvesting physical, you CAN buy the coins right back because the wash sale rules don't apply.  Gold coins are a collectible, not a security - and there's no ambiguity with that, unlike the situation with a gold ETF.

I did it through APMEX, and arranged the sell/buy transaction at exactly the same time so there's no problem with losing out because of price volatility.  They also apply the sale proceeds to the purchase directly, so there's no big bank transactions or wires to worry about. The person I talked to said a lot of people are doing this.  The spread was 3.5%, slightly better than most everywhere except Colorado Gold (who will only buy from you what they sold you).

The process was really very easy:  1) collect the coins and pack them in a small sturdy box, 2) call the company of your choice to lock in the sale & buy prices, 3) print voucher and add to the box, 4) send box registered and insured, 5) send check for the difference in buy/sell price, and 6) wait for your new coins to arrive.

If you have enough coins, this is completely worth it.  I probably have fewer than many on this forum and I'm going to net a very nice chunk of change, certainly more per unit time than I could get doing pretty much any other side job.  The worst part of the experience was mailing the box at the post office.  The clerk loudly announced to the crowded room the amount I was insuring it for, and then asked me what was in the box (after we'd already dealt with the hazardous item routine).  Makes you feel like a criminal for having physical possession of part of your wealth, which is how I know I'm on the right track!

[dualstow]

Interesting!

[Austen Heller]

If you have enough coins, this is completely worth it.  I probably have fewer than many on this forum and I'm going to net a very nice chunk of change, certainly more per unit time than I could get doing pretty much any other side job.  The worst part of the experience was mailing the box at the post office.  The clerk loudly announced to the crowded room the amount I was insuring it for, and then asked me what was in the box (after we'd already dealt with the hazardous item routine).  Makes you feel like a criminal for having physical possession of part of your wealth, which is how I know I'm on the right track!

I don't get this.  What happens WHEN (not if) gold goes beyond $2000?  You'll be sitting on tons of capital gains.  Perhaps you are planning to be in a much lower tax bracket by then?  Or you'll be gifting the coins to your heirs?

Didn't someone mention some sort of PP forum coin exchange a while back?  Seems like it could be a good idea, I'm sure someone here would have bought your coins to avoid the huge spreads.

Regarding the Post Office, your experience sounds awful, I'd be annoyed about them announcing the whole thing to everyone in the room.  Perhaps the UPS store would be better?...those are usually less crowded in my experience.

[Xan]

A tax deferred is a tax not paid.  Or so goes one line of thinking.  May as well put those $x,000 in your pocket right now.

[Libertarian666]

A tax deferred is a tax not paid.  Or so goes one line of thinking.  May as well put those $x,000 in your pocket right now.

Yes, but only if you have gains to set them against (other than the $3000 maximum offset against ordinary income). You can't put that money into your pocket right away otherwise; you'll have to wait, possibly a long time, to use up the loss.

[Austen Heller]

A tax deferred is a tax not paid.

I have heard this saying, but does it mesh with the world we're living in today?  Tax rates are headed UP, everybody's got their hand out.

[Libertarian666]

A tax deferred is a tax not paid.

I have heard this saying, but does it mesh with the world we're living in today?  Tax rates are headed UP, everybody's got their hand out.

Yep.

[sophie]

I'm with Xan - take the money now and worry about capital gains later!  It may never happen, or it may be far enough off that I'll be retired and in a lower tax bracket by that time.

For what it's worth, I have a lot of gold ETF $$ in an IRA account (rolled over from previous employers).  If I need to sell to rebalance, that's where it will happen.

[dualstow]

A tax deferred is a tax not paid.

I have heard this saying, but does it mesh with the world we're living in today?
...

Certainly makes sense to me. It took me a while to get my head around locking in a loss with something I wanted to own in the future, but it works. Taxes are inevitable. You might as well minimize them with a little tax loss harvesting.

Having said that, I sold some Barrick Gold (ABX) shares and then they promptly soared. Oh well.

[goodasgold]

Thank you, Sophie, for addressing the issue of tax harvesting physical gold.

Your comments dealt with long-distance tax harvesting via gold dealers in a distant state, with complications due to the issues of packaging, insurance and mailing.

Since I live in New York City, could I save myself some time and trouble (maybe even a few $$$) by using the subway or a bus to meet personally with a gold dealer in the NY-NJ-CT area?

Can anyone suggest gold dealers in the New York-New Jersey-Connecticut area who, for a reasonable fee, would be amenable to tax harvesting and immediate repurchase? How would the expense of going this route compare with going the long-distance route? And does the fact that I bought my physical gold in December 2012 and January 2013 complicate matters with regard to tax harvesting? Thank you.

[Reub]

Although I have not used them I have heard good things about Gold Coin Galleries of Oyster Bay.

http://www.coingalleriesofoysterbay.com/

[goodasgold]

You would feel safe on the NY subway system with several ounces of physical gold in your pocket?
[/quote]

I've lived in NY for about a quarter of a century and I've never had any problems. (Or maybe it's due to the huge, foul-tempered Rotweiler, kept from lunging too far by a stout chain-leash, which is my constant companion on the subway.)

Seriously, most of the NY subways have few crime problems. Besides, I would never be mistaken for a high roller by the average bad guy.

[Mark Leavy]

In case anyone is interested in tax loss harvesting physical, you CAN buy the coins right back because the wash sale rules don't apply.  Gold coins are a collectible, not a security - and there's no ambiguity with that, unlike the situation with a gold ETF.

This makes me wonder if one can tax loss harvest physical gold by selling to Harvey the rabbit who immediately sells back to you at the same price - with no spread.

[Libertarian666]

In case anyone is interested in tax loss harvesting physical, you CAN buy the coins right back because the wash sale rules don't apply.  Gold coins are a collectible, not a security - and there's no ambiguity with that, unlike the situation with a gold ETF.

This makes me wonder if one can tax loss harvest physical gold by selling to Harvey the rabbit who immediately sells back to you at the same price - with no spread.

I wouldn't, as I suspect the gov. would not consider that a legitimate sale.

However, you might be able to find a coin dealer who will do the paperwork in person for a reasonable fee at a price between bid and ask. I don't think that would look as questionable.

[sophie]

I'd be pretty nervous about traveling long distance on public transportation with a pocketful of gold coins, but otherwise it should be fine.  Just be sure to get separate documents for the sale and purchase, and call in advance regarding the spread so that you show up with the appropriate amount of cash.  Also, check the spread against the price for online sites.  I ended up paying about $70 for shipping both ways, which you have to set against the price of the subway/taxi/buses/car rental.

There's a coin shop in Paterson NJ, which is kind of a dicey neighborhood but I know someone who has made several purchases there with no problems.  I looked up places in Manhattan but there were no good prospects.  Plenty of places with signs out front proclaiming "We Buy Gold", but I doubt you'd get a fair price.

[Libertarian666]

I dealt with MTB a number of years ago and found them quite easy to work with. Everything was done over the phone and by mail, but they also have a physical location in Manhattan:

http://www.mtbcoins.com/index.html

I never tried to do any tax-loss harvesting with them, but it couldn't hurt to give them a call and see if they would be interested.

[Greg]

In case anyone is interested in tax loss harvesting physical, you CAN buy the coins right back because the wash sale rules don't apply.  Gold coins are a collectible, not a security - and there's no ambiguity with that, unlike the situation with a gold ETF.

I did it through APMEX, and arranged the sell/buy transaction at exactly the same time so there's no problem with losing out because of price volatility.  They also apply the sale proceeds to the purchase directly, so there's no big bank transactions or wires to worry about. The person I talked to said a lot of people are doing this.  The spread was 3.5%, slightly better than most everywhere except Colorado Gold (who will only buy from you what they sold you).

The process was really very easy:  1) collect the coins and pack them in a small sturdy box, 2) call the company of your choice to lock in the sale & buy prices, 3) print voucher and add to the box, 4) send box registered and insured, 5) send check for the difference in buy/sell price, and 6) wait for your new coins to arrive.

If you have enough coins, this is completely worth it.  I probably have fewer than many on this forum and I'm going to net a very nice chunk of change, certainly more per unit time than I could get doing pretty much any other side job.  The worst part of the experience was mailing the box at the post office.  The clerk loudly announced to the crowded room the amount I was insuring it for, and then asked me what was in the box (after we'd already dealt with the hazardous item routine).  Makes you feel like a criminal for having physical possession of part of your wealth, which is how I know I'm on the right track!

Do you have any IRS documentation backing this claim for no wash sale up? If so, I would be extremely interested in that.

[Libertarian666]

According to the IRS (http://www.irs.gov/instructions/i1040sd ... tml#d0e496):

"Wash Sales

A wash sale occurs when you sell or otherwise dispose of stock or securities (including a contract or option to acquire or sell stock or securities) at a loss and, within 30 days before or after the sale or disposition, you:

    Buy substantially identical stock or securities,

    Acquire substantially identical stock or securities in a fully taxable trade,

    Enter into a contract or option to acquire substantially identical stock or securities, or

    Acquire substantially identical stock or securities for your individual retirement arrangement (IRA) or Roth IRA."

I don't think that the IRS would consider gold coins a "stock or security", especially since they are classified as "collectibles". So if it were my transaction, I would think it was safe enough not to worry about the possibility of a wash sale.

Of course, I could be wrong, consult your tax adviser, etc.