Gold taxation thoughts

[ochotona]

The notion that saving taxes is somehow a "jerk move" is an alien concept to me.

It is written, "God loves a cheerful giver. It matters not if thou stiffest the IRS"

[vnatale]

Actually Vinny, there's no problem at all if ochotona sends the money to a donor advised fund.

DAFs are really nice, as they separate the decisions of how much & when to set aside for charity to which organizations & how much each to favor. Basically since discovering those I will never donate by check again. It'll always be highly appreciated shares. I simply then buy back the same # of shares with the money set aside for charity. Then I get the charitable deduction on the full amount (since I already itemize) AND avoid capital gains tax on the appreciated portion of the donated shares.

The math, for me, works out to a total tax savings of 60% of the donated amount, assuming the shares have appreciated exactly 100%. In other words, a charitable donation of $100 actually costs me only $40. Crazy!

I bet there are people who are quietly managing to figure out a way to game this system to their taxation advantage. Something like creating a charity and then funneling money back to themselves for administrative expenses. I'm sure that's illegal but you can see how great the temptation is.

I agree with you on the major but disagree on the minor.

The major agreement is the value of using a donor advised fund.

I donate Vanguard mutual funds.

It had been major ordeal to donate them prior to opening a donor advised fund. Because they were mutual funds and going to third parties, those third parties HAD to have an account with Vanguard to accept them.

For one organization I'd have to help them set up the Vanguard account, they'd receive my shares, liquidate them and close the account. Which meant the next time around I had to repeat the same time consuming process. And, also because they were mutual funds, Vanguard wanted instructions by about mid-December to promise a December 31st transfer.

In 2012 when I was discussing this ordeal with a friend he asked the simple question, "Why don't you open a donor advised fund?" I did (with Vanguard) and have never looked back. Since both the mutual fund and the donor advised funds are with Vanguard, I get a one day turnaround on the transfers which allows me to delay the decision of what to donate much closer to December 31st.

The minor disagreement is the way I do my deductions.

One year I itemize. The next year I do the standard deductions. The year I itemize I pay / make all contributions / real estate taxes / state taxes for two years. The other year I don't pay a cent for any of them (or, at least that is the way it used to be before the latest tax act capped tax total tax deductions at $10,000).

There is a % limit of your adjusted gross income that you can deduction for donations in one year. Any excess gets carried over to the next year. If I have any of that it is completely wasted as I'm definitely not itemizing and taking the standard deduction.

I bought that up in reacting to Ochotona's comment of donating $50,000 at once. If I'd done that much it one year it would have definitely caused me wasted deductions.

Finally, how do you come up with your 60% amount?

If I bought something for $50 and donated it when it appreciated 100% to $100, I'd have a $50 gain. We both agree in donating it I avoid paying the taxes I'd owe if I just sold it.

In my case, I'm avoiding the 15% federal capital gains tax and 5% (Massachusetts) state tax. 20% total taxes or $10 in taxes on the $50 gain. Therefore the $100 donation after the tax savings still costs me $90, with only a total tax savings of 10% of the donated amount.

We are both in the United States so the same 15% federal capital gains rate applies to you. Therefore, the only difference is your state and local taxes being enormously higher than my 5%.

Vinny

[vnatale]

For a completely different perspective on Donor Advised Funds, read this:

https://www.whitecoatinvestor.com/pro-c ... sed-funds/

It was a good, thorough discussion. With my bias, however, I am going to stick with the donor advised fund route. Many of the pro's for it directly fit my situation.

Vinny

[sophie]

Pretty much all the 2nd author's objections to the DAF could be solved by simply selling the assets as soon as they're transferred and donating away.

The fees are a bit of an issue, but the idea is that the amount you save in capital gains taxes by donating shares should more than cover the fee. In my case, the capital gains taxes saved with my very first donation were on the order of $1,500, compared to the $100 fee. Plus, I decided to let most of the money stay invested, and it's gained in value by another $1000 in a little over a year. Again, that's a win compared to the fee. And the charities are the ones who will eventually benefit!

So calling this a "jerk move" doesn't make sense to me. When it comes to the IRS, you bet that it pays to be selfish, and I see nothing at all immoral about it.

[Libertarian666]

Pretty much all the 2nd author's objections to the DAF could be solved by simply selling the assets as soon as they're transferred and donating away.

The fees are a bit of an issue, but the idea is that the amount you save in capital gains taxes by donating shares should more than cover the fee. In my case, the capital gains taxes saved with my very first donation were on the order of $1,500, compared to the $100 fee. Plus, I decided to let most of the money stay invested, and it's gained in value by another $1000 in a little over a year. Again, that's a win compared to the fee. And the charities are the ones who will eventually benefit!

So calling this a "jerk move" doesn't make sense to me. When it comes to the IRS, you bet that it pays to be selfish, and I see nothing at all immoral about it.

Why, that sounds almost like the old saying "Taxation is theft".

[vnatale]

So far, the gold IRA process is going well. The new custodian is going to oversee an in-kind transfer of SGOL from Schwab to their broker, US Bank, then I'll put in a sell order, and call the dealer and buy the metal after the cash is confirmed, so little or no time not being in my gold position. Hopefully less than a day. It's all transparent, with trusted (as far as you can trust your gold dealer, Schwab, and US Bank) public actors. The custodian doesn't own anything, they are just the traffic cop. It's fine.

I'm going to open an account with them as soon as I get the cashout of my Swiss annuity, hopefully this week or next.

Did you do this? If so, how has it worked out so far?

Vinny

[Libertarian666]

So far, the gold IRA process is going well. The new custodian is going to oversee an in-kind transfer of SGOL from Schwab to their broker, US Bank, then I'll put in a sell order, and call the dealer and buy the metal after the cash is confirmed, so little or no time not being in my gold position. Hopefully less than a day. It's all transparent, with trusted (as far as you can trust your gold dealer, Schwab, and US Bank) public actors. The custodian doesn't own anything, they are just the traffic cop. It's fine.

I'm going to open an account with them as soon as I get the cashout of my Swiss annuity, hopefully this week or next.

Did you do this? If so, how has it worked out so far?

Vinny

Yes, I did it, and it has been working out very well.

[vnatale]

To change the topic slightly, I stumbled into the fee schedule for the GoldStar gold IRA, they only charge a $175 total annual fee for a $100,000 account, 17.5 basis points. That includes storage. That's lower than any gold ETF. I stumbled into that one yesterday. That is cheaper than buying the next increment of safe deposit box insurance, my insurance is fully utilized, and I can't buy any more physical gold until I buy the next increment.

I'm serious thinking of taking my SGOL (39 basis points) holding at Schwab and flinging it over to GoldStar and saving money immediately and having real metal. They work with my favorite PM dealer.

Has anyone else used the GoldStar gold IRA? I'd love to hear from ochotona how it has worked out for him in the intervening 3+ years but he seems to have been inactive here since January of this year...

[vnatale]

So far, the gold IRA process is going well. The new custodian is going to oversee an in-kind transfer of SGOL from Schwab to their broker, US Bank, then I'll put in a sell order, and call the dealer and buy the metal after the cash is confirmed, so little or no time not being in my gold position. Hopefully less than a day. It's all transparent, with trusted (as far as you can trust your gold dealer, Schwab, and US Bank) public actors. The custodian doesn't own anything, they are just the traffic cop. It's fine.

I'm going to open an account with them as soon as I get the cashout of my Swiss annuity, hopefully this week or next.

Did you do this? If so, how has it worked out so far?

Vinny

Yes, I did it, and it has been working out very well.

Libertarian666 is the former Technovelist (who seems to be no longer with us)...but he seems to have also had an excellent experience (along with ochotona) with the Goldstar IRA...giving a response to a question I'd earlier asked today regarding other forum members' experiences with the GoldSTar IRA...