For their love of me, I drive men crazy.
easily defeated and never free.
What am I?
Of course, you are gold.
To many people, metal is, in fact, many different things. However, money is not what it is.
Some people are surprised by that.
I’ve observed over the years that many people mistake gold for money when they write to me with questions about buying, moving, or storing gold. They draw a variety of erroneous extrapolations about how they should manage their ownership of the metal from that.
Due to this, some people even miss out on significant opportunities.
When it comes to wealth management techniques, the fact that gold is not money makes a significant difference…
Why Does Money Matter and What Is It?
The long-running argument over whether bitcoin is a form of money or a nonmonetary asset is probably familiar to those of you who are interested in the virtual currency.
The IRS, government organizations, and the courts have all occasionally struggled with this problem. It’s crucial for a number of reasons… all of which apply equally to gold bullion.
Money, also known as currency, is a form of legal tender issued by a sovereign government, such as the United States. government, including face-value gold coins – isn’t regarded as an asset. It serves only as a value store, an accounting unit, and an exchange medium.
Governments have a particular interest in keeping track of money because they issue it… such as when you take it into or out of the country, or store it in a foreign financial institution, or use it for a large transaction. Because of this, they place such strict reporting requirements on it.
Governments, on the other hand, typically do not levy taxes on currency appreciation. It is not regarded as a capital gain if you have a Swiss franc account and the value of your currency rises in relation to the dollar, increasing your currency’s purchasing power.
If bitcoin or gold were regarded as forms of money, the same rule would also apply to them… hence the debate.
The Bullion Advantage
But bullion gold – gold that hasn’t been minted into legal tender coins, which is treated as money – is an asset, not money, and that matters… a lot.
Let’s go over some of the most important distinctions.
- The U.S. does not require reporting of purchases of gold bullion. government. Many people believe they are. That’s because if you pay with cash or a cash equivalent for $10,000 or more worth of bullion, the dealer must submit IRS Form 8300, “Report of Cash Payments Over $10,000 Made in a Business or Trade.” But not only purchases of precious metals are subject to this requirement. It applies to all cash transactions over $10,000, no matter what you’re buying. There is no need to notify Uncle Sam if you use a credit card to purchase bullion.
- When you import or export gold bullion from the United States, you are not required to declare it., the way you do with currency. It’s true that this is a complex matter, but many people suggest that you declare it anyhow to be on the safe side. But in reality, gold bullion is just another piece of personal property, like furniture or a car. – and cross-border movements don’t have to be reported if the value exceeds $10,000, as is the case with any form of currency (including legal tender gold coins).
- Reporting gold kept outside of the US is not required. Gold bullion is regarded as personal chattel property, the same as jewelry, works of art, and other valuable items, and can be kept in either a safe-deposit box or a private vault. The Report of Foreign Bank and Financial Accounts (FBAR) and the Foreign Account Tax Compliance Act (FATCA), on the other hand, impose a variety of onerous reporting requirements if you keep money in a foreign financial institution.
- Sales of gold are subject to capital gains tax reporting and payment, but losses are also deductible. Gold Billion is a collectible, according to the IRS. As a result, the profit from its sale may be subject to tax at the 28% cap gains rate. Your ordinary income tax rate and the length of time you’ve owned it both affect the actual rate you pay. When selling gold, you would report capital gains on Schedule D of Form 1040 and pay the tax when you file. In contrast, if you sell gold bullion at a loss, it might be used to offset other capital gains or even ordinary income.
The Universal Asset
Its role in wealth management strategies is more clear when gold bullion is viewed as an asset rather than a financial instrument.
Successful gold price speculators abound. Some even invest in funds like the SPDR Gold Trust, symbol: GLD on the NYSE. (However, since it is only paper, this doesn’t qualify as owning gold in my book.)
But by a wide margin, the majority of the world’s gold bullion is doing what assets should do in any wise wealth-management plan: securely storing value over the long term as a hedge against the ups and downs of markets in financial instruments like stocks, bonds, and the like.
Gold bullion is the ultimate “set it and forget it” strategy. If you haven’t “set it” yet by accumulating some of the yellow metal that “drive[s] men mad for love of me,” now’s the time to start.