Goods for Goods? Taxable event?
June 28, 2011 8:49 PM Subscribe
Capital Gains on Precious Metals exchanged for Goods and Services? I own Platinum, Gold, and Silver physical coins, bars, etc. and know my cost basis for all purchases and have not sold any. Let's say rather than sell them back to a coin dealer or other similar entity, I exchange gold or silver or platinum for a service or good or something other than currency, what are the tax implications?
What if I trade gold coins for a work of art or a 60's muscle car? Is that a taxable event or just a transfer out of one collectible into another with no realized gain or loss? How about real estate? Can I buy a summer house for $100 cash and "other valuable consideration" as is often inserted into contracts and not have to determine the value to the seller of the "other consideration" or the price appreciation I've realized? No urgency here, just thinking about what happens when you exchange a valuable good for a valuable good without either party transacting considerable cash.
What if I trade gold coins for a work of art or a 60's muscle car? Is that a taxable event or just a transfer out of one collectible into another with no realized gain or loss? How about real estate? Can I buy a summer house for $100 cash and "other valuable consideration" as is often inserted into contracts and not have to determine the value to the seller of the "other consideration" or the price appreciation I've realized? No urgency here, just thinking about what happens when you exchange a valuable good for a valuable good without either party transacting considerable cash.
Absolutely this is all taxable activity.
(Alternative answer: no, you have not just worked out the stunning loophole that has evaded millions before your...)
posted by pompomtom at 9:00 PM on June 28, 2011
(Alternative answer: no, you have not just worked out the stunning loophole that has evaded millions before your...)
posted by pompomtom at 9:00 PM on June 28, 2011
Just in case you're curious, here are some rejected arguments about the value of gold and silver coins, popularized by tax protesters like Irwin Schiff.
posted by StrikeTheViol at 9:24 PM on June 28, 2011
posted by StrikeTheViol at 9:24 PM on June 28, 2011
You may be thinking of a like-kind exchange (covered under IRS Code 1031).
posted by amyms at 9:41 PM on June 28, 2011
posted by amyms at 9:41 PM on June 28, 2011
Like-kind exchange is probably more relevant than barter here. Starting from Wikipedia, you'd probably need to receive a similar asset (i.e., another collectible) in return, and even then, you'd have to show that you aren't just holding them as an investment. Not sure how you would do that, because the alternative to an investment is that you're actually using the coins somehow.
And just in case you weren't aware: Long-term gain on collectibles can have a tax rate as high as 28%.
posted by RobinFiveWords at 10:12 PM on June 28, 2011
And just in case you weren't aware: Long-term gain on collectibles can have a tax rate as high as 28%.
posted by RobinFiveWords at 10:12 PM on June 28, 2011
If the IRS thinks you're trying to evade your tax obligations, you're in for a world of hurt, even if you wind up getting away with it.
But yes, this is a taxable event with exactly the same implications as if you had sold the commodity for cash before making a new purchase.
Nice try.
posted by valkyryn at 4:56 AM on June 29, 2011
But yes, this is a taxable event with exactly the same implications as if you had sold the commodity for cash before making a new purchase.
Nice try.
posted by valkyryn at 4:56 AM on June 29, 2011
The key to understanding taxes is to realize that you aren't being taxed on the dollars being traded, but the value. Which is simply denominated in dollars.
The classic example (for me) is the gold coin as salary argument. If my boss pays me a $50 buffalo gold coin (one ounce of pure gold), my salary is not $50. It is whatever the price of an ounce of gold is.
So, if you bought the coin for $5000 and it is now worth $10k, you have $5000 in profit. Since it is a long-term profit, it is likely a cap gain. If you sell it (whether for cash or trade), you have to book that profit as some kind of income.
The like kind exchange (appears to be) simply a deferral of your cost basis. You paid $5000 for the coin and traded it for a car, now that car has the $5000 cost basis.
posted by gjc at 5:43 AM on June 29, 2011
The classic example (for me) is the gold coin as salary argument. If my boss pays me a $50 buffalo gold coin (one ounce of pure gold), my salary is not $50. It is whatever the price of an ounce of gold is.
So, if you bought the coin for $5000 and it is now worth $10k, you have $5000 in profit. Since it is a long-term profit, it is likely a cap gain. If you sell it (whether for cash or trade), you have to book that profit as some kind of income.
The like kind exchange (appears to be) simply a deferral of your cost basis. You paid $5000 for the coin and traded it for a car, now that car has the $5000 cost basis.
posted by gjc at 5:43 AM on June 29, 2011
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posted by hattifattener at 8:54 PM on June 28, 2011