Thursday, December 8, 2011

Tip on Gold Investing

As a hedge to the stock market volatility, some investors are turning to gold and other precious metals. When you sell gold, you must report the difference between the sales price and your basis as a capital gain or loss. If you held the gold for more than a year, any gain is treated as a long-term gain. The federal income tax rate on long-term gains from precious metals is 28%, not 15%!! By using retirement plan funds instead of personal funds for gold investments, you can dodge a tax disaster. For example, gold coins that are minted by the U.S. government or one of the states, and some other gold coins of sufficient purity, can be held by IRAs. This is an exception to the general rule that prohibits IRA investments in coins and other collectibles.

Here are some ways to invest in gold:

• Gold bars or bullion
• Gold certificates
• Gold coins
• Gold stocks and mutual funds

Tip: You might swap precious metals in a like kind exchange at year-end. There is no current tax on the deal, but a tax loss is allowed for the difference. (The swap is actually a simultaneous sale and purchase.)

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