FATCA and offshore gold holdings

[sophie]

If you buy Perth Mint certificates or invest in bullion via the Hard Assets Alliance, you are holding offshore gold but technically don't have a bank account. The Perth Mint site makes it clear that they arrange things so that your account with them does not fall under the bank category.

Does anyone know what the FATCA requirements are? This is an interesting article (but by no means authoritative) suggesting that unallocated gold, e.g. Perth Mint certificates, is reportable, but allocated gold (e.g. bullion stored as allocated through Hard Assets or Perth Mint) is not. Sounds like too fine a point to trust that the IRS will overlook...

http://thesovereigninvestor.com/gold/ho ... -offshore/

(edit: forgot to include the link)

[drumminj]

I personally reported my BullionVault account, even though it's allocated storage. My CPA wasn't overly concerned, but I opted to play it safe rather than risk the ire of the IRS (yuk yuk!).

Would love to hear if anyone has or received more definitive guidance.

[Libertarian666]

My understanding is that allocated storage MAY not be reportable, whereas unallocated storage PROBABLY is reportable.

I have a Global Gold account (unallocated) that I report even though they aren't a financial institution according to Swiss law.

Since there is no clear guidance from the IRS, I err on the side of caution.

[I Shrugged]

A reportable account does not have to be a bank account. It can be a brokerage account or something similar. I don't know if a Perth Mint Certificate counts as an account of any type. No one knows, it doesn't seem. I have never seen a report of someone being fined under this law for owning overseas gold in any form. But then again, I am not combing the net looking either. All I have ever seen are opinions, which are educated guesses.

[sophie]

Interestingly, Hard Assets Alliance advertises that because they are a US institution, you can choose an allocated overseas storage location without having to report it. Sounds like that's a gray area too, but certainly the account (which will list the overseas gold holdings) being US-based means you wouldn't be able to hide anything. Not sure if the overseas storage in this instance provides the protection that we normally expect from offshore gold holdings.

My impression from internet research is that the Perth Mint certificates are reportable, and so is any gold holding that involves a bank (even if it's just hosting the safety deposit box). And unfortunately, reporting isn't just a form you file on your tax return...you have to go to a Treasury website and report directly there. The tax form is extra, and kicks in when the amount of the holdings exceeds $50K.

[thisisallen]

Consulting a tax accountant who specializes in helping US citizens with reporting their foreign accounts may be good.
This guy offers answers to questions on this subject. Someone who can frame the proper question could ask him about the gold reporting.

https://nomadforum.io/t/i-m-a-u-s-accou ... thing/4917

(Found the link via Google search)

[Libertarian666]

Interestingly, Hard Assets Alliance advertises that because they are a US institution, you can choose an allocated overseas storage location without having to report it. Sounds like that's a gray area too, but certainly the account (which will list the overseas gold holdings) being US-based means you wouldn't be able to hide anything. Not sure if the overseas storage in this instance provides the protection that we normally expect from offshore gold holdings.

The answer to that is "no". HB explained why jurisdictional diversification is a good idea, and one of the reasons is that it makes you less vulnerable to acts by a single government.

[Mark Leavy]

Some excellent discussions here. I'm enjoying the topic.

I'm curious though. Do any of you hold gold overseas in a country that you don't regularly visit? Say... at least once every year or two?

I don't currently hold anything outside of the US - but I imagine that if I did, I would want it to be in a place that I'm likely to stop by and check in on every few years.

And... if that were the case, I would seriously look at some sort of secure storage that is not associated with a banking institution. Something like Das Safe or other private vaults for storing valuables.

[I Shrugged]

The thing is, most of these vaults do not let people in to view their gold. Being able to visit the country is not the same as being able to visit your gold. So no matter what, you have to have faith in the vault process.

[I Shrugged]

Interestingly, Hard Assets Alliance advertises that because they are a US institution, you can choose an allocated overseas storage location without having to report it. Sounds like that's a gray area too, but certainly the account (which will list the overseas gold holdings) being US-based means you wouldn't be able to hide anything. Not sure if the overseas storage in this instance provides the protection that we normally expect from offshore gold holdings.

The answer to that is "no". HB explained why jurisdictional diversification is a good idea, and one of the reasons is that it makes you less vulnerable to acts by a single government.

Both you and Sophie are guessing, though. Not that I know any better myself.

Some things we know. You own the gold. It's allocated. It's in an overseas vault.
You are not required to report the US account.
You are not required to report allocated overseas gold.
All of that is clear from researching it.

So the remaining question is, does the presence of the US dealer from whom you bought the gold, and who is selling you overseas vaulting, create a pathway for confiscation? We can conjure various scenarios pro and con there. We have seen the government shaft GM bondholders in violation of the bankruptcy law. So the government can certainly try to get it. They would have to force HAA to illegally sell your gold. I will ask someone at HAA. Not that the answer will be the final word, but let's see what they say.

[sophie]

Great thanks, Shrugged!

Could you also ask about whether it would be easy for, say, a party that is suing you to get their hands on the gold in the account. Specifically, whether the fact that the gold is held overseas make that any more difficult than getting to an account at, say, Fidelity. This is a far more likely scenario than an out and out government confiscation (or wealth tax, which is much the same thing).

Harry Browne said that the overseas gold would at least give you time to fight an action, because of the delay inherent in getting assets from overseas. But Hard Assets Alliance advertises that no matter where the gold is, it can be shipped to you within a few days. That's not much of a barrier.

[Mark Leavy]

The thing is, most of these vaults do not let people in to view their gold. Being able to visit the country is not the same as being able to visit your gold. So no matter what, you have to have faith in the vault process.

I wasn't referring to "gold storage" vaults. I meant that I would investigate storing gold in commercial vaults designed to hold arbitrary valuables. For example, I would look at Das Safe and high end, private wine storage companies.

[Libertarian666]

The thing is, most of these vaults do not let people in to view their gold. Being able to visit the country is not the same as being able to visit your gold. So no matter what, you have to have faith in the vault process.

Global gold can arrange for a vault visit.

[I Shrugged]

Great thanks, Shrugged!

Could you also ask about whether it would be easy for, say, a party that is suing you to get their hands on the gold in the account. Specifically, whether the fact that the gold is held overseas make that any more difficult than getting to an account at, say, Fidelity. This is a far more likely scenario than an out and out government confiscation (or wealth tax, which is much the same thing).

Harry Browne said that the overseas gold would at least give you time to fight an action, because of the delay inherent in getting assets from overseas. But Hard Assets Alliance advertises that no matter where the gold is, it can be shipped to you within a few days. That's not much of a barrier.

I asked back when this was current. The guy who got back to me was VERY slow on replying. After a couple of back and forths, he put it as, "We do not have authority to sell or deliver any client's metal" (without the client's consent). I'm not sure the Feds would let that stop them, so who really knows. At least at Perth, they specifically state that they do no honor court orders from other jurisdictions.

[sophie]

Yup that's what I thought.

I decided on a Perth Mint depository online account, which allows monthly autoinvesting into unallocated gold for half their usual fees. It's like an ETF but safer and with much lower expenses. I also liked that the account allows you to convert to allocated storage, e.g. once you've accumulated enough for a 10 oz bar. I'm going through the setup now and will have a report later. The biggest hurdle has proven to be getting cash deposited into the account, but that's primarily an issue with my bank rather than Perth Mint.

[stuper1]

Sophie, what are the fees for the Perth Mint depository online program?

[sophie]

https://www.perthmint.com/storage/pricing.html

Fees are cut in half for automated monthly investments. Thus, your monthly contribution (minimum of $50) is subject to an 0.5% fee. There is no fee for unallocated storage. When you sell, you pay a fee that starts at 1% and reduces as the amount of the sale increases. This most certainly beats an ETF for the amounts I plan to invest, and also because this will be a long-term holding.

Unallocated gold holdings are listed as a liability on the mint's balance sheet. To convert to allocated storage, you pay a one-time fabrication fee (e.g. $70 for a 10 oz bar) plus storage charges of 1%/year. This is more expensive than an ETF, but comparable to most allocated storage programs (and obviously much safer). This step is required if you intend to take delivery.

The main wrinkle so far has been depositing money into the account. The depository online operates similarly to Treasury Direct: you can only link one bank account and once you've done that, it's very difficult to change. I picked my JP Morgan Chase account because even though the Perth Mint uses a US bank account (also at Chase), I wanted to use a bank that could handle international transfers. Unfortunately, Chase does not allow you to pay into a bank account you don't own via electronic transfer. You either have to billpay with a paper check or wire the money. I am testing the paper check with a small amount of money but have no expectation that this will work. So I'm going with monthly wires instead, which are free for Private Client accounts. I was lucky enough to get one of those when I sold my last apartment and had to park the proceeds at Chase temporarily. I keep thinking they'll catch up with me one day and kick me out of the Private Client program, but it's been over a year and no word from them yet.

[stuper1]

Thanks, Sophie. Definitely sounds like this could be a good option for off-shore gold with reasonable fees for those of us who aren't quite yet in the Rothschild category.

One thing I'm not quite clear on is about possible currency conversion issues. Do your U.S. dollars get converted to Australian dollars before your gold purchase, or do you buy the gold in U.S. dollars?

For U.S. people, are there any tax form reporting requirements, like form 8621 or any others, for the Perth Mint depository online program?

[sophie]

You can choose to have a US dollar or Australian dollar account.

Good question about form 8621. I assumed that all Perth Mint holdings should be treated as a collectible.

[stuper1]

Will the Perth Mint keep track of your cost basis for all of your monthly investments into perpetuity? Otherwise, you will need to track that yourself for tax purposes, which seems like a pain to me.

[thisisallen]

BillPay works fine with BullionVault.

[Libertarian666]

You can choose to have a US dollar or Australian dollar account.

Good question about form 8621. I assumed that all Perth Mint holdings should be treated as a collectible.

I assume that is true also. However, CEF doesn't have that liability, as far as I've been able to tell anyway.

Note: not a tax lawyer, do your own research, etc.

[sophie]

BillPay works fine with BullionVault.

Billpay from which bank?

I've used billpay to get money into accounts from Ally Bank, so I was thinking it's an issue specifically with Chase. I even called them and they said they had no mechanism except wires for this type of business transaction.

Re tracking contributions: I just checked and no, doesn't track cost basis. That is a pain but not impossible in the era of spreadsheets.

Sounds like it would be easier to use a service like Bullionvault, but it's only been around for a few years, as opposed to the Perth Mint's 150 year history. I worry a bit that these new services sprung up in response to a big gold boom post 2008, and that if enough people start getting tired of gold not rising like that again (if that is the case), these services might start running into problems. They weren't designed for quiet, long-term investors like us.

[thisisallen]

BillPay from: USAA Federal Savings Bank.

Some friends (not PP investors) have been using BullionVault for years, and recommend it.

[sophie]

I'm no authority on the Perth Mint, but here's what I have gathered from online info:

- the account is specifically set up so as NOT to be a bank, so it is not subject to the same US reporting requirements as Swiss banks.
- the Mint has been stable for 150 years and is backed by the Australian government. The online trading houses are for the most part less than 10 years old and privately run. There have been recent failures of a few of these enterprises in which shareholders lost a lot of their invested capital (Bullion Direct, Perth Gold) - not to mention the Jon Corzine fiasco for commodities.

There is legislative risk in that the Australian government can do something drastic like gold confiscation. So can the US. I don't think there's any 100% safe way to own gold, so it's about minimizing and diversifying - not eliminating - risks. I considered several options for international diversification and settled on this as a good mix of convenience and safety. I'm just reporting my experience in case anyone else is interested, and would be interested to hear from anyone who goes the same route.