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<p>[QUOTE=&quot;midas1, post: 1021825, member: 21309&quot;]<a href="http://etfdailynews.com/blog/2010/10/14/despite-record-gold-prices-your-holdings-may-be-worth-less-than-you-think-gld-slv-iau-dgl-dbs-grow/" target="_blank" class="externalLink ProxyLink" data-proxy-href="http://etfdailynews.com/blog/2010/10/14/despite-record-gold-prices-your-holdings-may-be-worth-less-than-you-think-gld-slv-iau-dgl-dbs-grow/" rel="nofollow">http://etfdailynews.com/blog/2010/10/14/despite-record-gold-prices-your-holdings-may-be-worth-less-than-you-think-gld-slv-iau-dgl-dbs-grow/</a></p><p><br /></p><p>Here are some of the highlights but you should read the entire article</p><p><br /></p><p>&quot;...According to the Internal Revenue Service (IRS), gold is considered a collectible – a capital asset with its own tax rate. This makes it no different from art, antiques, stamps, certain coins, wines, or your favorite single-malt scotch for that matter...&quot;</p><p><br /></p><p>&quot;...Gary E. Ham of the Beaverton, Ore.-based accounting firm of Jones &amp; Ham P.C., notes that gold does not qualify for the 15% minimum tax bite that many investors consider routine when calculating gains on investments held more than a year (by that I’m referring to long-term capital gains)...&quot;</p><p><br /></p><p>&quot;...Instead, profits from gold investments are subject to a 28% maximum tax rate if held for more than 12 months. And, if those investments are sold in less than a year, the profits from gold count as ordinary income, which can also be taxed at far higher rates. (And those “higher” rates could become a whole lot higher in the future, depending upon what strategies present and future White House administrations resort to in order to deal with the mounds of debt U.S. taxpayers will be financing for generations to come.)</p><p><br /></p><p>&quot;...On the bright side, taxes aren’t triggered until there is a “taxable event,” meaning you buy or sell your gold.</p><p><br /></p><p>It’s worth noting that the same is true for losses in that you can’t use them to offset other taxes if you haven’t actually had a taxable event...&quot;</p><p><br /></p><p>&quot;...However, the same is not true for investors who chose one of several popular metals exchange-traded funds (ETFs) like the SPDR Gold Trust (NYSE:GLD), the iShares Silver Trust (NYSE:SLV), or the iShares COMEX Gold Trust (NYSE:IAU). Holders of these investments can be held accountable every step of the way.</p><p><br /></p><p>Precious metals ETFs are set up as something called a “grantor trust,” according to Barron’s and the IRS. This means that ETF investors are treated as owning undivided interests in the actual metal that’s owned by the fund. Therefore, when the ETF sells some of its gold for any reason, investors are liable for gains or losses from the sale. And this has to be reported to the IRS as part of gross income even if a cash distribution from the sale is never received.</p><p><br /></p><p>There also are wrinkles depending on how an ETF achieves its objectives. For instance, both the PowerShares DB Gold Fund (NYSE<img src="styles/default/xenforo/clear.png" class="mceSmilieSprite mceSmilie8" alt=":D" unselectable="on" unselectable="on" />GL) and PowerShares Silver Fund (NYSE<img src="styles/default/xenforo/clear.png" class="mceSmilieSprite mceSmilie8" alt=":D" unselectable="on" unselectable="on" />BS) use futures contracts to mimic underlying direct gold investments.</p><p><br /></p><p>This means that they fall prey to something the IRS calls the “mark-to-market” method, which stipulates that any futures contracts held at the end of a calendar year will be treated as if they were sold at fair market value. This is called a “deemed sale.”</p><p><br /></p><p>Where this matters to investors is that each shareholder is then, in turn, liable for his or her pro-rata share of the taxes on the deemed sale even if the underlying asset (the futures contracts the fund owns) haven’t actually been sold...&quot;[/QUOTE]</p><p><br /></p>

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