Like kind exchanges shelter gold and silver gains from taxes

Investors in precious metals have a tremendous advantage over other investment asset classes. Owners of precious metals can elect to not pay taxes on the sale of precious metals by entering into a like kind exchange. This is not a form of barter or trading. The owner enters into a sale and directs the proceeds to a qualified exchange company and then purchases replacement precious metals. For example, investors who own gold and silver can take advantage of the shifting price differentials between the two metals and the rate of appreciation in gold and silver. The 1991 amendments to the tax regulations provide that an exchange of non-depreciable personal property (such as precious metals) qualifies for non-recognition of gain or loss if the exchanged properties have a similar nature or character. These amendments superceded older rulings issued in the 1970s and '80s. However, even with the 1991 tax regulations many investments cannot be exchanged tax-free. These include stocks, bonds, REITS and limited partnership interests. Gold, silver and other precious metals are exchangeable because of their similar nature and character. Gold and silver's similar atomic structure and electron configurations make their nature and character almost identical, as well as commercial and industrial use and value as store of wealth. Like kind exchanges not only reduce, defer, and/or eliminate taxes on gains but also reduce or eliminate the related financial costs, such as debt, interest and taxes on debt replacement on the purchase and sale of investment and business property. Because they are so easy to transact, business owners and investors can exchange virtually any type of business or investment asset whenever they want, regardless of how it is owned, how long it has been owned for, and whether or not it is leveraged with debt. Investors who owned gold over the last six months have enjoyed a 14.77% increase. However, if that same gold investor has converted their gold bullion into silver bullion, they would have enjoyed an 85.56% increase in wealth over the period and paid no taxes on conversion. Current taxes on gold and silver held for more than a year are 28%, plus state taxes. Taxes for assets held for 12 months or less are 35%, plus state taxes. In addition, there are significant advantages to exchange precious metals rather than owning precious metals thru self directed IRAs. These advantages include: there are no limitations on the type of gold and silver you may purchase; no limitations on the amount you may own; no annual fees; no storage or custody fees; the owner may possess the gold and silver directly; the owner may distribute or transfer gold or silver either as a gift or business transaction; sales may not be reportable to the government; losses may offset regular income; and the gold and silver may be owned overseas for asset protection purposes. Common types of exchanges would also include investors converting from physical possession to allocated storage or overseas storage; from coins to bars or into exchangeable traded funds; or from gold to silver. Stephen Robison J.D. LL.M Taxation is the president of Strategic Property Exchanges, LLC, Boston, Mass.