7709 / What transactions involving precious metals are reportable on an investor’s income tax return for the sale year, including foreign tangible assets?

All sales of precious metals result in a reportable income tax transaction, as a gain or a loss, for federal income tax purposes in the year of a sale. They are similarly reportable for purposes of any applicable state income tax. This reporting on a personal income tax return is required whether the sales transaction is structured as a like-kind exchange or not, and whether or not it is a reportable transaction on Form 1099B by a dealer. Of course, any failure to report income for federal (and state income tax purposes where applicable) can result in civil and/or criminal tax penalties.

Specified foreign financial assets (if accounts exceed $10,000 at any time during a calendar year) were first required by law (so-called FBAR) to be reported by U.S. individual taxpayers on Form 8938 (Statement of Specified Foreign Financial) as part of the 2011 Form 1040. 2012 Form 8938 required disclosure of (1) foreign deposit and custodial accounts and (2) other foreign financial assets. On June 7, 2012, the IRS released guidance for completing this requirement. It provided three major pieces of guidance on the reporting of specified foreign financial assets on Form 8938:

1)  A foreign safe deposit box will not be considered a financial account;

2)  Taxpayers who meet the minimum filing thresholds must report all specified foreign financial assets; and

3)  Taxpayers with foreign tangible assets such as precious metals (e.g., gold) or tangibles such as jewelry, autos, antiques, and other collectibles will generally not be required to report those assets on Form 8938 if the assets are held directly, unless those precious metals or other tangible assets are held through certificates issued by a foreign person, since the indirect ownership would be considered a “specified foreign financial asset.”¹

In late 2016, FBAR filing deadlines were changed to June 30 from April 30 impacting filings for 2017 and subsequent years. The change also allows for a 6 month extension of filing. The IRS has also provided for electronic filing of the annual report on electronic Form FinCEN 114.