Tracking Capital Gains/Cost Basis on Gold Coins?

[TripleB]

How are you tracking cost basis for capital gains/collectibles tax purposes on gold coins?

Unlike a brokerage where there's a record of what you paid for a stock, you might get nothing for a gold coin, or it might be a handwritten piece of paper from a pawn store.

My concern is that IRS may claim I forged the receipt and try to charge me collectibles tax on the full 100% of the gold sale if I can't prove how much I paid.

One interesting thing with gold is that the spot price is probably recorded somewhere, on a daily basis, forever recorded on a website as proof of what it was worth on a certain day.

So I could possibly "prove" what I paid for the gold by reconciling bank statements showing how much cash I withdrew from my savings account on a certain date, and the price of gold on that date, plus the handwritten receipt from the pawn store should be good enough.

There's also a matter of gold coins being fungible. If you are always buying 1 ounce American Eagles, for example, then I imagine you get to pick which you sell, depending on which would be most favorable to you. Unlike stocks, once you pick LIFO or FIFO and get stuck, with gold, you can choose to sell the one with the most appreciation in the tax year you have a lot of tax credits, and then in the next year sell the one with the lowest appreciation.

Is there any wash sale rules with gold coins? If the IRS wants to call it a collectible and tax me at 28%, then I imagine wash sale rules don't apply, and I could sell it and immediately rebuy one to either (a) realize a taxable gain in a year I have lots of tax credits and want to reset the cost basis or (b) realize some loss.

Can I take a collectibles loss off against other income? Or is it like gambling income where you can only take the loss against gambling income? Tax-loss harvesting of gold coins in taxable accounts might be interesting if it's legal. Would you have to sell a 1 ounce Eagle and rebuy a 1 ounce Kruggerand that is "substantially dissimilar?"

I'm personally disgusted that the IRS has the balls to tax gold at 28% when it's really money and want to make sure I'm in a good position to protect myself and reduce taxes as much as possible. I plan to die penniless and have my last check bounce so at some point I will have to sell gold coins even if I have some of my gold in ETFs within tax-sheltered IRAs for easier rebalancing during accumulation phase.

[FarmerD]

Here's my non-lawyer non-accountant take on your situation.

About the only thing you can do is make a "good faith" attempt to keep track of what you paid for a coin.  To the best of your memory write down in a ledger the type of coin bought, what you paid for it, and what you sold it for along with buy and sell dates. If you don't remember, check the spot price if possible on about the day you bought and add a reasonable premium to that total then document your rationale.  If audited, show your ledger to the IRS.  Unless you're trafficking in large amounts of gold, they will probably accept it.  It's sort of like proving your charitable contribution to your church.  Unless your church can provide you with an end of year receipt, simply record the amounts and date paid.  If you claim you donated $500 the IRS won't bat an eye.  Claiming you donated $25,000 with no official receipt to your church will certainly raise eyebrows.   Same concept probably applies here. Honestly, what else can you do. 

Gold coins don't have serial numbers or some other specific identifier so you should be able to use any accounting method you choose for any coin you have. I'd make sure that if you sell a Kruggerrand, don't use as your tax basis what you paid for a Gold Eagle.  Eagles carry a much higher premium.

No clue on the wash sale rules.  My guess is, to be on the safe side, if you sell a Gold Eagle one day, you should be able to turn right around and buy a Kruggerrand the next day without the wash sale rule being applied to you.   

Don't know about tax harvesting gold but I'd like to know.  Unfortunately I bought into a gold etf at $1800/ounce so I'd like to be able to tax harvest that loss.  If I hold for a year, is that a long term capitol loss I can use to offset other long term capitol gains on my stock funds?   

[WildAboutHarry]

Is there any wash sale rules with gold coins? If the IRS wants to call it a collectible and tax me at 28%, then I imagine wash sale rules don't apply, and I could sell it and immediately rebuy one to either (a) realize a taxable gain in a year I have lots of tax credits and want to reset the cost basis or (b) realize some loss.

Wash sale rules don't apply to gains, only losses.  So you can sell (at a gain) and buy the same thing back immediately.  Not sure why you would want to, though.

Capital gains of any kind can be offset by capital losses of any kind, as far as I know.  And any unused losses can be carried forward to the following year(s).

And don't forget that up to $3,000 in capital losses can be used to offset income each year.

[steve]

This is from my notes on gold and tax loss harvesting:
Regarding capital gains
Collectibles – this might include art, coins, stamps, if held more than one year, any gain
on the sale of collectibles is taxed at the taxpayer’s marginal tax rate, to a maximum of
28%.
All short-term capital gains are treated as ordinary income.
Therefore, a taxpayer in a lower tax bracket may be better off triggering short-term rather than long-term capital gain on gold coins or bullion.

The wash sale rules, that prevent you from taking a loss and then immediately repurchasing a security, do
not apply to collectibles, so that you can a take a loss and then repurchase the metal immediately.
Generally, gold held as coins or bullion is treated as “collectibles,”?

This is just information from my notes it is not tax advice. Consult with your own tax advisor to see if this correct.

[dualstow]

This should probably be in the gold section.
Anyway, see also foglifter's thread here: http://gyroscopicinvesting.com/forum/ht ... ic.php?t=7
There's a bit of info that might help, like fnord's answer on inheriting coins without documentation.