- 1 FBAR for Gold, Silver & Other Precious Metals
- 2 What Is a Financial Agency & Institution Under 31 USC 5312?
- 3 Foreign Bank Account with Certificates
- 4 Foreign Mutual Fund
- 5 Directly Held Precious Metals
- 6 Storage Accounts for Gold and Silver
- 7 Other Forms for Precious Metal Reporting
- 8 Golding & Golding: About Our International Tax Law Firm
FBAR for Gold, Silver & Other Precious Metals
When it comes to the FBAR (Foreign Bank and Financial Account Reporting aka FinCEN Form 114), one of the biggest complications stems from just trying to decipher who has to report and what type of foreign assets are reportable. In general, FBAR is limited to foreign bank and financial accounts. On one end of the spectrum, a typical foreign bank account clearly needs to be reported and a taxpayer would be hard-pressed to prove to the IRS that their foreign bank account does not have to be included on the FBAR. On the other end of the spectrum are the other foreign assets, such as precious metals such as gold and silver – these are not as clear-cut. Lets’ take a look at 5 key facts about reporting precious metals.
What Is a Financial Agency & Institution Under 31 USC 5312?
From a baseline perspective, in general, precious metals may be reportable.
As provided by 31 USD 5312:
(a) (1) )In this subchapter— (1)“financial agency” means a person acting for a person (except for a country, a monetary or financial authority acting as a monetary or financial authority, or an international financial institution of which the United States Government is a member) as a financial institution, bailee, depository trustee, or agent, or acting in a similar way related to money, credit, securities, gold, a transaction in money, credit, securities or gold, or a service provided with respect to money, securities, futures, precious metals, stones and jewels, or value that substitutes for currency.
(a)(2)“financial institution” means— (A)an insured bank (as defined in section 3(h) of the Federal Deposit Insurance Act (12 U.S.C. 1813(h)));
(N) a dealer in precious metals, stones, or jewels;
Foreign Bank Account with Certificates
In general, when a taxpayer owns certificates representing an investment of a foreign precious metal, chances are that it is going to be reportable if it is held in a financial institution — certificates that represent ownership are similar to shares of stock. And, if the shares of stock are held in an account (“stock account”) — then it is reportable for the FBAR. When the account is merely a designated storage unit, it can get confusing because it is not technically an account. But, if there is access and maintenance by the institution, then it can be reportable. In addition, whether or not the precious metals are allocated or unallocated may impact the overall reporting requirements. Without getting too far into the technicalities, when gold is allocated, the owner can take physical possession whereas when it is unallocated, the taxpayer cannot take physical possession.
Foreign Mutual Fund
Many foreign investment companies these days offer investment funds involving precious metals. In general, most foreign mutual funds are going to be considered reportable for FBAR purposes — and just because the underlying asset is a precious metal would not negate the reporting requirement.
Directly Held Precious Metals
The primary exception to having to report precious metals is when it is owned directly — but this too can get very complicated. For example, a person may have gold bars in a safe within their house and typically, this would be non-reportable and qualify as directly owned — but who keeps gold bars in their house, right?
Usually, a person stores their metals at a physical financial deposit institution. While technically it is not an account, it is being held by a third party – so the definition of “directly held” would become extremely important. The IRS has not delved far into deciphering the ambiguity of the term “directly held.”
Storage Accounts for Gold and Silver
Whether or not precious metals maintained in a storage account are reportable, will be determined in part by the type of storage location. Presumably, if a person wants to obtain their own storage unit and put their precious metals into the warehouse unit at the storage location in which they are the only authorized user — presumably that would be considered directly held. Instead, if the taxpayer pays a third-party location to manage and oversee the warehouse location reserved for the specific precious metal, the IRS may not see that situation as “directly held.”
Other Forms for Precious Metal Reporting
While the FBAR is the most common reporting form, there may be other reporting forms that are required as well such as Form 8938 (FATCA aka Foreign Account Tax Compliance Act) and Form 8621 (PFIC Passive Foreign Investment Companies).
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure.
Contact our firm today for assistance.