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Gold/Mining/Energy : Precious and Base Metal Investing -- Ignore unavailable to you. Want to Upgrade?

To: MoneyPenny who wrote (32555)	11/21/2004 10:42:47 AM
From: Wyätt Gwyön	Read Replies (2) \| Respond to of 39344

i think there are some instances where IRAs can be taxed without distribution. most obviously is taxation of foreign dividends/interest income (no income tax credit on these, so i preferentially hold Aussie and Kiwi fixed income in a taxable acct to get the tax credits). but i got turned off of holding Canroys in an IRA when i heard about UBIT tax or something. it sounded like a mess i didn't want to deal with. also, i heard in the past that there was a possibility that the gold ETF would be taxed in an IRA if gains are treated as gains on "collectibles". note that LT gains in taxable are NOT taxed at regular equity cap gain rates. according to the GLD site, long term gains are taxed at 28% maximum (nearly double the 15% LTCG on equities). from the prospectus: MAXIMUM 28% LONG-TERM CAPITAL GAINS TAX RATE FOR US SHAREHOLDERS WHO ARE INDIVIDUALS Under current law, gains recognized by individuals from the sale of ‘‘collectibles,’’ including gold bullion, held for more than one year are taxed at a maximum rate of 28%, rather than the 15% rate applicable to most other long-term capital gains. For these purposes, gain recognized by an individual upon the sale of an interest in a trust that holds collectibles is treated as gain recognized on the sale of collectibles, to the extent that the gain is attributable to unrealized appreciation in value of the collectibles held by the trust. Therefore, any gain recognized by an individual US Shareholder attributable to a sale of Shares held for more than one year, or attributable to the Trust’s sale of any gold bullion which the Shareholder is treated (through its ownership of Shares) as having held for more than one year, generally will be taxed at a maximum rate of 28%. The tax rates for capital gains recognized upon the sale of assets held by an individual US Shareholder for one year or less or by a taxpayer other than an individual US taxpayer are generally the same as those at which ordinary income is taxed. streettracksgoldshares.com looking further into the prospectus (wow, it only took me a week to think of searching for the keyword "IRA" :), i found this: INVESTMENT BY CERTAIN RETIREMENT PLANS Code section 408(m) provides that the acquisition of a ‘‘collectible’’ by an individual retirement account (IRA) or a participant-directed account maintained under any plan that is tax-qualified under Code section 401(a) is treated as a taxable distribution from the account to the owner of the IRA, or to the participant for whom the plan account is maintained, of an amount equal to the cost to the account of acquiring the collectible. The Sponsor has received a private letter ruling from the IRS to the effect that a purchase of Shares by an IRA, or by a participant-directed account under a Code section 401(a) plan, will not be treated as resulting in a taxable distribution to the IRA owner or plan participant under Code section 408(m). However, if any of the Shares so purchased are distributed from the IRA or plan account to the IRA owner or plan participant, or if any gold received by such IRA or plan account upon the redemption of any of the Shares purchased by it is distributed to the IRA owner or plan participant, the Shares or gold so distributed will be subject to federal income tax in the year of distribution, to the extent provided under the applicable provisions of Code section 408(d) or Code section 402. See also ‘‘ERISA and Related Considerations.’’ so, that sounds like there's no tax in an IRA. but note that what they say is that they just received a letter saying that the purchase of such Shares is not treated as a "distribution"; they don't say anything about whether the sale of said Shares is taxable. if there is an iron-clad guarantee of no tax consequences for purchases and sales in an IRA, i would consider IRAs a better vehicle than taxable due to the higher cap gains rate. but it still seems to me there is a bit of a Murkiness Factor here, though maybe it's an "all clear" for IRA ownership? thoughts?