ETF surprise

Practical and Practice issues for Professionals who practice in the area of taxation. Moral, social and economic issues relating to taxes, including international issues, the U.S. Internal Revenue Code, state tax issues, etc. Not for "tax protestor" issues, which should be posted in the "tax protestor" forum above. The advice or opinion given herein should not be relied on for any purpose whatsoever. Also examines cookie-cutter deals that have no economic substance but exist only to generate losses, as marketed by everybody from solo practitioner tax lawyers to the major accounting firms.
Judge Roy Bean
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ETF surprise

Post by Judge Roy Bean »

Okay, all you high-net-worth-individuals with ETF investments - beware!

http://online.wsj.com/article/SB1000142 ... 64848.html
SPDR Gold Shares, for example, holds gold bullion in a "grantor trust." As such, profits and losses aren't claimed by the trust but "flow through" to holders and are taxed at their income-tax rates.

There is a big difference at tax time: While holders of gold stocks in a mutual fund would pay tax on long-term capital gains (those held longer than a year) of 15%, long-term gains for Gold Shares holders are taxed at 28% because physical gold is a "collectible."
Tax advisers and preparers are worried. "Most investors in these products have no grasp of what they're getting into," says Robert Gordon, head of Twenty-First Securities Corp. in New York. "I doubt if the brokers selling Alerian MLP ETF [a basket of energy firms] are explaining that it is a corporation that owns parts of many partnerships that own oil assets and owes an extra layer of taxes."
If you own a publicly traded partnership, you may have to file a tax return in one or more states where you don't live if income generated in those states—say, from an oil well—is above a certain level. Even if the payout on one investment is below a state's threshold, the total from two or three may put you over the limit.
The Honorable Judge Roy Bean
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Number Six
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Re: ETF surprise

Post by Number Six »

The question is whether the taxpayer's accountant is competant enough to realize that he will be liable for all the taxes that he theoretically is. Precious metals vs. pm etf's are a tough call for those who believe they will continue to appreciate. Since no SS based records are generated with the PMs, they have a tax advantage, even the IRS can be hazy on actually liability though the law is clear--28% of net profit. Most people figure the tax as like property.

ICTA has been warning precious metals and coin dealers that paying customers in multiple checks to foil the 8300 cash reporting requirement, could involve them in "conspiracy" charges in money laundering. Many believe the $10,000 level should be raised to keep up with inflation.

The "Sovereign Investor" has quite a few suggestions to maximize profits in investments. I wonder how many actually show a profit.
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