Ask Lee Now: Answering Reader’s Questions July 2014

About New Wealth Reporting Requirements and Exceptions

Ken R. writes: Do you think the following is going to impact the precious metals markets?: “On Tuesday, July 1st, 2014, an important provision of a new law, Title V of the Obama Administration’s HR Bill #2847, known as FATCA, goes into effect.” Also, can you comment on the impact on investors/ investments in general on this issue?

The new FATCA (Foreign Account Tax Compliance Act) rules you referenced will subject all overseas accounts containing more than $50,000 to heavy-handed rules and reporting requirements. The major consequence will be that many offshore accounts will be closed – either by their owners or by the financial institutions that don’t want to deal with the new regulatory burdens being placed on them from Washington.

It’s hard to say whether FATCA will have any impact on precious metals prices. Certain types of offshore precious metals arrangements will definitely be impacted. But for now, simply storing physical bullion in a foreign safe need not be reported. Only actual accounts handled by financial institutions are subject to FATCA.

Simon “Sovereign Man” Black advises as follows:

If you have an account with an organization like that takes in deposits from the banking system, this is akin to a financial institution and financial account. It must be reported on Part I of the form [FATCA Form 8938]. Perth Mint Certificates also count and should be reported as financial assets. Physical gold stored in a safety deposit box overseas, however, is not a financial asset and does not need to be reported.

Perhaps some proportion of investors who are frustrated by the lack of privacy associated with offshore bank, brokerage, trust, and precious metals accounts will opt to shift some of their wealth to gold and silver in physical, legally non-reportable form.

What Coin and Metals Dealers Have to Tell the Government – and Don’t

Robert Z. writes: I recently renewed my subscription to Independent Living and received my silver bullion coin and the three special reports. Thank you.

However, upon reading the report “Insiders Tell All,” an article on page five under the title “Ensnaring Holders of Gold and Diamonds,” a bullet point there has me quite concerned. It mentions that holders of silver coins totaling $5000 or more may trigger a precious metal dealer to file IRS Form 1099B.

Since last summer, I have been accumulating American silver eagle coins… It is my intention to hedge against inflation and leave a legacy to my three grown children. If it eventually becomes necessary for me or my children to sell this silver collection, what happens then? Is Uncle Sam going to come after me with a big capital gains bill?

The bullet point in our Special Report, “Insiders Tell All: 29 New Snares IRS Bureaucrats Are Using to Zero In on Unsuspecting Taxpayers and Their Assets,” applies specifically to pre-1965 “junk” silver coins only. Moreover, the potential reporting trigger pertains to the coins’ face value (a pre-1965 90% silver dime
has a face value of 10 cents but an intrinsic metal value of about $1.40).

Dealers aren’t normally required to file a Form 1099-B unless a cash transaction of $10,000 or more takes place. But some will report transactions of as little as $5,000 just to be safe – in their minds, anyway.

There are a few other reporting thresholds, but they rarely apply to individual buyers or sellers. The bottom line is that if you don’t make purchases of $10,000 or more using cash, you’re unlikely to have your transaction reported to the IRS.

Dangerous Infections on the Rise and How to Cope

Scott W. writes: Hi, Lee, I can’t thank you enough for all the help you are. I have recommended your newsletter and book on privacy to I don’t know how many people. The efforts of you and your staff are greatly appreciated.

My sister has a lung infection that the doctors have given up trying to treat with antibiotics. They have told her that she is just going to have to learn to live with it. Have you ever heard of colloidal silver being used in a nebulizer?

First, let me offer my deepest sympathies to your sister. Having an infection that is resistant to conventional treatments is terribly frustrating.

I can’t offer specific medical advice or make any promises about colloidal silver’s ability to help fight a lung infection. But, yes, some people do indeed use colloidal silver in nebulizers. There is anecdotal evidence that this delivery method can be effective.

A small concentration of colloidal silver can help keep breathing treatment devices sanitary. Slightly larger medicinal concentrations can help deliver anti-microbial silver particles to areas of infection in the throat and/or lungs. As long as your sister uses colloidal silver, prepared from distilled water and only in recommended medicinal concentrations, it should pose no risk – though, of course, she should inform her doctor if she is still taking prescribed antibiotics or undergoing other treatments for her infection.

IRS Unlikely to Zero in on You Through Your Precious Metals Dealer

Frank S. writes: I read with great interest the article in the May newsletter by Seth Van Brocklin about “selling when the time comes.” It left me hanging, in a sense, since it did not address the problem many of us who bought from major gold companies will have. Although the article mentioned, as do those companies, that purchases are “not reportable” it is still recorded somewhere and those files could be demanded by a greedy IRS who could then mine the information to find out where each lot of metal was sold if no longer possessed by the original buyer. Is it unlikely that the IRS would demand records from large companies that sold un-reportable gold years ago?

Seth Van Brocklin responds: It is unlikely that the IRS would sift through purchase or sales records kept by coin dealers for purposes of trying to track down individual buyers/sellers. The agency doesn’t have the authority to conduct random “fishing expeditions.” However, during an individual audit it can demand to see your records.

The IRS will normally only know about any taxable sales of physical gold when you report them as a capital gain or loss. During an audit, they could uncover clues from bank transactions that you have realized gains on gold. IRS suspicion of underreporting of capital gains means it’s your burden to prove otherwise.

As my article states, the more you can buy and sell locally using cash to avoid generating entries in bank accounts, the less visible your precious metals transactions will be.

What You Need to Know About Coin and Gun Show Vendors

Mark B. writes: After reading the May 2014 article on “Selling Precious Metals” I was dismayed that no information was given about selling at coin shows. There are a significant number of these shows across the country and there are many dealers/buyers present to provide competitive bids (not to mention the benefit of saving time traveling to all the coin stores). What are the pros and cons for selling at the coin shows?

Tax authorities pay close attention to gun and coin show vendors. There’s nothing wrong with perusing coin shows – they’re set up mainly to attract coin buyers, but you may be able to shop some coins around for offers as well. As you indicated, a potential advantage is being able to obtain multiple bids from different dealers without having to drive around town.

A potential disadvantage of coin shows is that they tend to be geared toward collectible coins as opposed to ordinary bullion products. Some dealers prefer not to even deal in low-premium bullion coins because the profit margins on them are so small. A coin show probably wouldn’t be the place to try to unload massive quantities of junk silver, for example. Unless, perhaps, you intend to set up your own display booth.

One longstanding coin show, the Long Beach Expo, advises as follows: “If you have hundreds of coins, you’ll probably need a table… What could be better than displaying your inventory and selling it to dealers and public attendees? Sure, you could walk from table to table but if you have a lot of coins it may be difficult and rather cumbersome to successfully shop your inventory around.”

Scare Stories About Nuclear Waste Remain Exaggerated at Best

Dan writes: Thanks again for your help in negotiating these times.

Preventive measures for leading a healthy life are good, but what about the radiation from Japan?
I’ve heard stories about mountains of dead fish on the sea floor off California, radiation in the milk in California, starfish dying by the thousands, seals and fish with radiation burns on them, and now radiation in the sea food from the Pacific. I did read that the government refuses to test for it, as it might “hurt relations” with Japan. If it cannot be contained and will continue into the foreseeable future, it would appear that the planet is on a death watch, especially if it drifts through the Arctic and into the Atlantic.

What’s the truth, and what can we do about it?

There have been a lot of exaggerated scare stories, and they continue to circulate on the Internet.

Japan has delayed restarting most of its reactors, as the public seems opposed to nuclear power due to the perceived risks. I suspect public opinion will change when liquid natural gas and other imported sources of energy become unbearably expensive.

Yes, there is some basis in fact for concern about nuclear disaster risks. Radioactive water has spilled into the Pacific Ocean. But by the time that water reaches North America, the radiation concentrations are so small as to be indistinguishable from the radiation that occurs naturally or from other man-made sources. We are exposed to radiation everywhere, every day, and something like boarding an airplane presents a much greater risk of cancer due to radiation exposure than consuming fish caught off the coast of Japan.

There hasn’t been a single confirmed human casualty due to radiation exposure from the damaged Fukushima Daiichi nuclear plant – not a single one.

To help protect your cells from damage caused by radiation and other potential carcinogens, eat a diet rich in fresh fruits and vegetables that contain antioxidant compounds. Consider vitamin supplements (mainly vitamins C and E, along with beta-carotene) as well.