Turn a Precious Metals Loss into a Gain – NOW – with Tax Swaps
By Rich Checkan
Precious metals are not subject to a holding period for tax swap sales. IRS Code Section 1091 prohibits the re-purchase of a security you sell for 31 days. But, that does not apply to precious metals. As a result, you can sell and immediately buy back precious metals… the same day! And, it is perfectly legal to do so.*
And, the process is too simple not to consider…
- Send us your precious metals.
- Sell and immediately buy them back at preferred spreads.
- Capture your loss at minimal out-of-pocket expense.
- Receive the same precious metals back.
Now, this seems like it goes counter to everything you ever learned about investing. Everyone knows the formula for making money… Buy low and sell high.
But, what if I told you there were a time and a place for everything? What if there was a perfectly good reason to sell low?
And, what if that time was right now to sell gold, silver, platinum and palladium?
I can hear you all now. “Rich has really lost it, hasn’t he?” Au contraire. You need to hear me out on this one…
Take a look at the precious metals you currently own…
- Did you buy gold, silver, platinum or palladium higher than today’s prices?
- Did you watch them fall in value precipitously?
- Do you still believe you need them in your portfolio and would love to hold onto them?
If so, you are a perfect candidate for a Tax Swap.
But Rich, why would I do that? Simple…
- You can capture the loss for tax purposes.
- You can offset gains one for one.
- If you do not have gains to offset, you are permitted to use $3,000 of the total loss per year until you use it all up.
- You can minimize your exposure to the market by dispensing with the 31 day holding period.
- In many cases, you can get back the exact same merchandise you sold at the new cost basis.
Let me tell you, the savings you experience can be quite substantial. And, if you conduct your Tax Swap through the right people, such as ASI and our team, you can do so at a preferred commission – 2% spread for bullion and Perth Mint Certificate swaps and 4% for numismatic coins.
This is quite low considering it could cost you anywhere from 8-10% if you sold and bought back while being subjected to full market spreads and a fluid, rapidly fluctuating precious metals Spot Price.
Bottom line, this makes sense, and it makes sense now…but, there is a catch. You physically have to ship your bullion coins and bars, your Perth Mint Certificates or your numismatic coins to us, and we have to physically ship them back to you. This is an IRS requirement. If it wasn’t a requirement, I think you can easily see where there might otherwise be some abuses…where people would try to capture paper losses without actually selling or repurchasing anything.
Of course, you would need to cover the cost of shipping, insuring and handling in both directions along with the preferential commission of either 2% or 4%. And, for Perth Mint Certificates, there would be a $50 Certificate fee for each new Certificate issued. These funds would be paid out of pocket, and you would receive back the exact ounces you sold.
The good news is you don’t need to perform a Tax Swap hoping it will all work out to your advantage. You can actually see if it will be beneficial before you execute the transaction.
Consult with your tax attorney or CPA first, but there is a very simple formula to determine if this is right for you…
If the tax loss you are able to capture is 10 times or more than the cost of capturing the loss, this is a no-brainer. If the tax loss you are able to capture is less than 10 times the cost of capturing the loss, you may still very well benefit, but you should work through all the numbers with your advisor to be sure before moving ahead.
Here’s a quick example to clarify…
Let’s assume you have 10 1-ounce Gold Eagles, the Spot Price of gold is $1,230/ounce, you sell the coins back to us at 1% over the Spot Price, and it costs $168 (approximate) for round-trip shipping, handling and insurance (R/T S/H&I).
Your Sell Back Price - $1,242.30/coin X 10 = $12,423.00
Your Buy Back Price - $1,267.15/coin X 10 = $12,671.50
Your 2% Spread - $24.85/coin X 10 = $248.50
Your Total Out-of-Pocket Expense - $416.50 (2% spread plus R/T S/H&I)
Using the 10 Times Rule, if you paid $1,658.80/coin or more, you should move ahead to capture your tax loss of $4,165 or more.
Our Preferred Client Relations representatives can walk you through the calculations, provide the numbers you need to consult with your tax attorney, CPA or advisor, and help you execute your Tax Swap if your trusted advisor agrees you can benefit.
This is not rocket science. It is a little-known yet highly-effective strategy to turn lemons into lemonade. And, the time to do this is not during tax season, not at year end… rather, now, when the precious metals prices are lowest. This way, your cost is lower since it is a percentage of a lower number, and your tax loss captured is the greatest at the lows.
So, yes, you really ought to consider selling your gold – silver, platinum and palladium – low.
This strategy is perfect for folks like me who believe in and buy gold and silver as insurance. Now that it has fallen, why wouldn’t you take advantage of the opportunity to benefit from the fall?
Asset Strategies has been in business since 1982. In that time, there have been a few instances where Tax Swaps made sense. Most recently, we helped numerous clients with Tax Swaps in the 90’s.
The time is right again for this service, and we have the knowledge and experience to make the process of capturing your loss painless and effortless.
Call us today to see if a Tax Swap is right for you. Or, if you’d rather, send an email to start the ball rolling today.
*Don’t take our word for it. Consult your CPA or Tax Attorney today.