Good Article about Gold ETF's also Tax Loss Harvesting Tip

[ppnewbie]

https://seekingalpha.com/article/382584 ... etf?page=1

On page three it says that tax loss harvesting and moving into another gold etf is allowed. Not sure how accurate this is.

[boglerdude]

"Well, did you expect the asset you bought to behave the same?" - IRS auditor

prob will never be worth their effort to enforce.

[pmward]

"Well, did you expect the asset you bought to behave the same?" - IRS auditor

prob will never be worth their effort to enforce.

Until you show me someone who has actually been audited for this, precedent set in the courts, or some clarification from the IRS explaining what "substantially identical" means within the context of a mutual fund or ETF, I personally don't worry about this. Neither the IRS nor the courts have any more idea than we do what "substantially identical" means in the context of an ETF or mutual fund, hence why they have not went after anyone because of this and don't currently worry about it in auditing.

[Xan]

"Well, did you expect the asset you bought to behave the same?" - IRS auditor

prob will never be worth their effort to enforce.

Until you show me someone who has actually been audited for this, precedent set in the courts, or some clarification from the IRS explaining what "substantially identical" means within the context of a mutual fund or ETF, I personally don't worry about this. Neither the IRS nor the courts have any more idea than we do what "substantially identical" means in the context of an ETF or mutual fund, hence why they have not went after anyone because of this and don't currently worry about it in auditing.

Yours is a perspective I hadn't heard, and it's certainly an interesting one. It's certainly rational.

But what if the clarification or precedent gets set tomorrow, and then the last 7 (or however many) years of your tax returns are fair game?

[pmward]

"Well, did you expect the asset you bought to behave the same?" - IRS auditor

prob will never be worth their effort to enforce.

Until you show me someone who has actually been audited for this, precedent set in the courts, or some clarification from the IRS explaining what "substantially identical" means within the context of a mutual fund or ETF, I personally don't worry about this. Neither the IRS nor the courts have any more idea than we do what "substantially identical" means in the context of an ETF or mutual fund, hence why they have not went after anyone because of this and don't currently worry about it in auditing.

Yours is a perspective I hadn't heard, and it's certainly an interesting one. It's certainly rational.

But what if the clarification or precedent gets set tomorrow, and then the last 7 (or however many) years of your tax returns are fair game?

1) Odds of a true precedent in the courts are low. What would likely happen is the IRS would change the documentation to provide clarification, and as is typical in these situations it would start the following year and not be something that would be back punishable. Remember that these laws came into existence before ETF's and mutual funds, so any judgment on them in the context of ETF's and mutual funds is purely subjective. Every opinion you've ever heard on this subject, mine included, are subjective. I can say that my accountant has been through audits on his clients that have swapped one fund for another at a different company that tracks the same index, and the IRS has never bothered to even bring it up.

2) In a worst case scenario where they decide to go nuclear and go after everyone (which isn't really feasible since damn near everyone is guilty of violating "substantially identical" under some subjective translation of the words), it's not like I couldn't just sell some assets to pay the bill. It would be a pain in the butt yes, and realize another taxable event, but it wouldn't be the end of the world.

3) There is also a cost in being too careful of this law, and that cost is both paid up front, and potentially unnecessary. It's a matter of picking your poison. Personally, especially being an average Joe, I'm ok with pushing the boundaries a bit knowing I can always liquidate some assets to pay the bill should the very low likelihood event transpire that that they decide to suddenly clarify the law and back enforce it against everyone. Now, if I were someone in the top 10%, where I knew I was under the IRS's microscope, I might be a bit more cautious of this. But for now I would rather not pay a fee up front that currently has no evidence of being necessary.

In general, as in all things about investing, I think everyone should educate themselves and come to their own conclusion on the risks they are willing to take. There are risks on both sides that need to be weighted in potentially paying an unnecessary tax up front vs potentially having to back pay taxes in the future.

[Kbg]

Fellas,

There is tax case precedent on this. If you go to tax court the judge will make the call but a gold fund for a gold fund...you are going to lose. Gold fund for a gold miners fund you are probably fine.

The law is there, whether it gets enforced, completely different issue.

Generally how these things work is something flags you for an audit, then you get the full r****l exam and everything is fair game and will likely be reviewed...with lots of details requested on the thing that actually flagged you.

Having had this experience, I recommend honesty and integrity in filing your tax returns. I expected to one day get audited on the thing that I was audited for and going in I knew I would be fine because I knew the law on the particular issue, adhered to it scrupulously and have tried to be accurate and honest in all my tax returns...with all that it was still stressful because of worrying about getting something wrong elsewhere. I can’t Imagine the experience knowing I had been fraudulent.

[boglerdude]

Wellll what was it. And mail audit?

[pmward]

There is tax case precedent on this.

Link to the case? I've never seen any precedent set in the context of ETF's or mutual funds. If there is evidence hiding out there, it would be very valuable for me and anyone else who comes here.