This is an excerpt from www.coinweek.com See: http://tinyurl.com/pvrqr2a [April 2012, maybe different rules now] Sure lots of unfavorable and complicated tax regulations I didn't know anything about until today. There's much more grief for taxpayers, this is just a brief intro: "...Most precious metals ETFs, like other commodity ETFs, are not organized as corporations. Instead, most are master limited partnerships. Since precious metals ETFs periodically liquidate holdings to cover operating expenses, some as frequently as every three months, there will be taxable gains and losses to put on tax returns for each year of ownership. Further, the ETFs that hold futures contracts are required to value such holdings at market value as of the end of the year. What this means is that shareholders of these ETFs will have to pay taxes on the rise in metals’ prices as if their holdings were sold on December 31, even though the shareholder did not sell any shares that day. Therefore, in rising markets, investors in a commodity ETF that holds futures contracts would have to report taxable gains or losses each year instead of waiting until they actually sell their shares in an ETF. Adding to the complexity is that the gains or losses from commodity ETFs are considered 60% long-term and 40% short-term for tax reporting purposes. The actual length of time that the investor held shares in the ETF makes no difference! By being classified as short- or long-term gains and losses, there is the possibility that investors may not be able to deduct all of a loss in the same year that it occurred..." [more]
I believe the article is a little confused between ETF, ETN, and MLPs. He/she seems to be talking about ETFs of commodities MLPs. These commodities ( at least the ones I am familiar with are resource commodities such as energy ( gas, oil, etc) and not GLD and other PM ETFs. I have held GLD many times and the tax scenario given has not occurred, even with options, but once I held an oil ETF which I did have hair pulling tax reporting, but the broker had everything laid out so it wasn't a killer. The difference as I understand it is that the energy commodities being mentioned in the article did not have the product in their possession ( oil, gas, etc) where as precious metal funds had specific SEC filings to insure possession of product. Not all commodities are the same. Either misunderstanding or a scare tactic, but incorrect. If you are still in doubt, read the SEC filings for GLD or SLV, as it will indicate if the tax situation is different from normal stocks ETF, but it isn't in their cases. Only hold investment instruments you can understand.
Yeah, I have also had PM ETF positions both long and short and no such tax complications exist. Jim seems to be giving Patrick Heller the benefit of the doubt as to whether the article was a misunderstanding or a scare tactic. My money is on scare tactic, since it seems Patrick Heller is a bullion dealer and owner of Liberty Coin Services. He also has newsletter, of course. These guys really tick me off as they try to peddle their goods by attempting to scare the unknowing. Mike
I'll let you guys sort this out. I would never buy SLV or GLD under any circumstances, so tax reporting is immaterial to me. I just posted the item since it's tax season.
