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End of Year Reminder: Sell ETF Losses; Buy Physical Metals—No Wash Sale Rule

Jeff Clark, Senior Precious Metals Analyst, GoldSilver 
DEC 6, 2017

We know our readers invest in precious metals in various ways. One way is through ETFs. If you are one of these investors, pay taxes to the U.S., and are holding onto any positions with a loss since the time you bought, here’s a heads-up: if you act by December 31, you can capture that loss on your taxes without losing your exposure to metals.

The “wash sale” rule was designed to discourage people from selling securities at a loss simply to claim a tax benefit. Section 1091 of the U.S. Tax Code defines a “wash sale” as a transaction in which an investor sells a security at a loss, but then repurchases the same or a “substantially similar” security within 30 days (before or after the sale date).

However, in its current form, the wash sale rule only applies to “securities,” and physical precious metals are not included in the definition of “securities.” This means the rule does not apply to bullion ETF holders who sell those securities for a loss and buy physical metals within 30 days before or after their sale of the bullion ETF. While both the bullion ETF and physical metals give you exposure to the price of metals and the volatility insurance that comes with it, the investments are sufficiently different in nature that they do not trigger the wash sale rule.

So, if you have losses on any bullion-backed ETF—gold, silver, platinum or palladium—you can claim that loss on this year’s taxes if you sell it for a loss any time before December 31. But, you can immediately buy physical metals with the proceeds. (This obviously assumes the sale is not in a tax advantaged retirement account.)

There are obvious advantages to this strategy: you can not only claim the loss on your income tax return, but you are permitted to buy physical metals with the proceeds right away. Further… 

1) Precious metals prices are low. Gold and silver are one-third and two-thirds below their 2011 highs, respectively.  It’s bargain hunting season. You can buy gold and silver at the same prices as seven years ago.

2) You can own PHYSICAL metal. Owning a tangible form of wealth not only comes with greater security than a paper form of gold, but it also carries many distinct advantages ETFs and most other investments don’t. I challenge you to glance at the list in that last link and not see how gold and silver bullion can be advantageous to you.

There aren’t many tax strategies left that can work to your advantage as an investor. But this one offers the opportunity to claim a loss and swap buy a superior product that Mike and everyone else at GoldSilver is convinced will soon be the next great financial bubble.

And you can pre-order the brand new 2018 gold Eagles and silver Eagles right now.

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