To: HighProb who wrote (7284 ) 4/28/2006 12:33:59 AM From: Patrick Slevin Respond to I found another, that implies that Silver will be sold off to meet expenses.First of all, there appears to be the basic problem of only a few people understanding how an ETF works. So let's take care of that right now. Simply put, an ETF is a passive trust. It can only issue or redeem ETF shares upon a tender to or from the fund of so-called "baskets" by the ETF's market makers, who are formally referred to as Authorized Participants. The term basket originated from the basket of stocks making up a stock index, which is what ETFs originally tracked. A silver ETF basket is 50,000 shares initially representing 500,000 ounces of silver. I say initially because over time trust expenses will erode the number of ounces in each basket and therefore in each ETF share. resourceinvestor.com Gains from the silver ETF will be taxed at the "collectibles" rate of 28% vs. the long-term capital gains rate of 15% (or less). This means ETF investors should consider using tax deferred accounts such as IRAs to the extent possible. There are other bothersome tax implications of owning shares in the silver ETF including the fact that the trust must constantly sell silver to pay its expenses, which is treated as a taxable sale at the 28% rate. Meanwhile, trust expenses can only be deducted as miscellaneous itemized deductions subject to a 2% adjusted gross income threshold. While this will be a minor annoyance for many ETF investors, I mention it simply because the complication is not necessarily applicable to the alternative, physical bullion held in your own possession.
