“If I hold gold at a bank in Switzerland, is that reportable to the IRS?”
That little question sure kicked open a can of worms…
Lawyer Joel Nagel had just opened the floor for questions at a conference at the fancy California Club in L.A. Right away, he was hit with that one.
I knew I could sit back for a while and watch the sparks fly after that question.
[ad#Google Adsense 336×280-IA]You can imagine the questions that followed… “If it’s non-reportable, then do I have to pay taxes when I sell it?”
Of course you have to pay taxes.
“Reporting” requirements for financial assets have increased dramatically this year – especially for assets held overseas.
If you have a bank account overseas or an investment account overseas, then the IRS wants to know about it.
It requires you to report it.
But what about gold?
Joel was honest with the crowd.
He explained – in simple terms – how the IRS sees it.
In short, the IRS does not consider gold held abroad as a “foreign financial asset.”
So if you have a property outside the U.S., and you have gold outside the U.S., then you are free to bury your gold on your property and not report it, if that makes you happy.
It is your gold. And even with the newer, more onerous reporting requirements, you don’t have to file any paperwork on your gold.
You don’t have to file any paperwork on any foreign property that you own in your name either, for that matter… The IRS does not consider foreign property to be a foreign financial asset either. So both foreign property and gold are considered “non-reportable” foreign assets by the IRS.
(Again, please don’t confuse “non-reportable” with “non-taxable.” If you sell at a profit, you pay taxes on that profit.)
The key thing here is that YOU hold them.
It gets tricky fast, though…
For example, what if a foreign bank holds your gold? Now you probably have what Joel calls “counterparty” risk…
If there’s counterparty risk, then your gold MIGHT be considered a foreign financial asset – and therefore reportable. The same is true with a property… If you personally own it, that’s fine. But if it’s held in other ways, then it might be reportable.
So how do you distinguish between what is reportable and what isn’t?
Joel told the crowd that the IRS actually does a nice job on its website clearing up questions about reporting requirements. This question and answer from the IRS is a perfect example:
Question 22. I have a safe deposit box at a foreign financial institution. Is the safe deposit box itself considered a financial account?
No, a safe deposit box is not a financial account.
That’s interesting… If I read that correctly, then it’s not reportable if you want to hold gold in a safe deposit box in a foreign bank. However, if the bank holds your gold for you, and it appears on your bank statement, then – from how I understand it – that’s considered a foreign financial asset.
I am not the expert on this, but it seems like if your gold is in your safe deposit box, then it is yours, it is not a financial asset according to the IRS. But if it is on your account statement, then it’s likely a foreign financial asset.
Reporting requirements have gone up on financial assets, particularly ones held abroad. If you are uncertain at all, you need to consult with a lawyer like Joel to make sure you are complying with U.S. laws. (You can learn more about Joel Nagel here)
Your best starting point about whether assets are reportable or not is actually the IRS “Basic Questions and Answers” page right here.
Check that out… it’s pretty darn informative if you have an interest in this…
And remember, once again, just because it is non-reportable does not mean it is non-taxable!
Good investing,
Steve
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Source: Daily Wealth