Avoid the scrutiny of FATCA/FBAR/Form 8938 by putting your gold in an offshore safety deposit box

Cross posted from the Isaac Brock Society.

Simon Black (Do I Have To Report My Offshore Gold…?) asks whether custodial gold “accounts” (e.g., James Turk’s Gold Money) fall under FATCA provisions and his people think so. However, gold kept in a safety deposit box would not fall under FATCA:

What’s more, in all of those 544 pages, there is not a single mention of the words, “gold”, “silver”, or “precious metals”. So there’s still quite a bit of mystery with respect to the question, “Do I have to report my offshore gold…?”

I’m still having my team go through the rules; after an initial read, though, the language of the regulation does suggest that custodial gold institutions (like GoldMoney, etc.) should be reported. Offshore safety deposit boxes (like Das Safe) do not.

This is good news for “structuralists” like myself. In a discussion with Just Me, I learned that my suggestion of opening a few extra accounts to get one’s total over 25 (thus avoiding a detailed FBAR) could be “structuring”. Structuring is the practice of breaking up a single large transactions into multiple transactions below the reporting threshold. See what happened to this Greek American couple: My Big FAT IRS case. A US Person in Canada could withdraw funds from their FATCA covered account, until it is below $50,000, and then buy legal tender gold coins (Maple Leaf). These coins would go into safe storage–meaning it would be safe from burglers and from the snooping noses of the IRS, for such coins would not be reportable under FATCA, FBAR, or Form 8938. But almost certainly, it would be a violation of United States law for you or me to exercise our Canadian freedom to buy legal tender coins minted by the Royal Canadian Mint and legally purchased in a legitimate Canadian business, providing all kinds of jobs to Canadians. You would become a structuralist.

For those readers in Canada, I suggest that you take few seconds and take a deep breath. Breath in that Canadian air. Isn’t that good? That’s because you are breathing freedom–freedom from the tyranny of the United States.

Bear in mind also the ramifications of these legal tender coins for Form 8854. The current retail buy price of the Maple gold (1 oz of super fine gold, purity of 0.9999) is about $1650 (See Canadian PMX in the Toronto Area), but its face value under legal tender laws is $50 CDN. So let me ask the question: when reporting on Form 8854, does one report the legal tender value or the intrinsic value of legal tender coins? If you had ten million US quarters, you would have to report their face value on Form 8854 (US $2.5 million). It would be illegal to report only the intrinsic value of the coins (ca. $500,000). This is because the US quarter is a legal tender coin and its reportable value is what is marked on the coin. So therefore, if you have 6,000 Gold Maple Leaf coins, you would be required to report CDN $300,000 on Form 8854. Accuse me of being a structuralist vis-a-vis United States law. Just do it! But I am obeying the laws of Canada where I live.

There are some people who say that gold is not a good investment, such as the crony capitalist extraordinaire Warren Buffet. Others point to the gold chart and say that this is why gold is a bad investment. Well, I admit that that argument is slightly counter-intuitive.

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Goldman Sachs says gold will go down $500: LOL

The Financial Post has repeated a Business Insider article about Goldman Sach’s prediction that gold will go down $500.  Here is my comment:

The National Post loses credibility with these Business Insider “articles”. Henry Blodget, the founder of Business Insider lost his right to trade in the US when he openly pumped dot.com stocks but then said privately that they were worthless. Others are just partisan hacks who write anything to make the Obama administration seem credible or the US economy seem stable.

The facts are that the interest rate can’t go up because that would cause the economy to collapse. The United States can’t stop monetizing its debt because it has too large a debt, too large a budget deficit and unfunded liabilities in excess of 60 trillion dollars. So the factors which cause the gold to go up are actually becoming stronger not weaker.

Goldman Sachs is one of the banks that is trying to manipulate the price of gold down, and their report that gold will drop $500 is a case of short and dump on–i.e., the opposite of pump and dump–in short and dump on, you first short something, then you loudly claim as publicly as possible that it is going to go down for whatever reason.

When I went to the Canadian PMX in December there were no one oz. coins or bars of gold or silver. They said they would have delivery in January, which they did around the second week. Get it while you can. Imagine the price of gas went down to 50 cents a litre but you went to the gas station only to find out that it was going to be a couple weeks or more before they had any gas. Well, a lot of good it does to have falling prices if there is none to be had. The prices of gold and silver are manipulated and the world markets are a broken price setting mechanism. That is because of the large short positions (paper gold) sold by the bullion banks. While there is abundant paper traded every day, the actual physical gold and silver is scarce.

The physical gold market vs. phoney gold markets

The phoney silver and gold markets, e.g., the London and New York exchanges, trade in multiples of paper in relationship the actual available physical metal.  Today, a call to my local coin dealer shows that the market price is far too low.  The Canadian PMX expects to have one ounce physical coins including silver American Eagles, Silver Rounds, Maple Leafs, Philharmonics, and bars; and 1 oz gold Maple Leafs, bars, and Philharmonics only by the middle of January.  This means:  (1) the mints can’t keep up with the investor demand because the current market price is too low; (2) no one who actually already owns physical species of precious metals in the Toronto area are bringing their coins to Canadian PMX to redeem them at these pathetically low market prices.  Thus, those with physical metal know that they are holding value, while the current paper market in which traders pass back and forth many multiples of paper metal with little physical backing is an absolute farce.

I remember those who came from manipulated markets in the Soviet bloc countries during the cold war had severe supply demands.  I heard a testimony once that people would stand in line at markets for a long time, not even knowing what was for sale.  When you final came to the front of the line, they might be selling left shoes size ten, and you would buy them, as many as you could, because you never knew when you might have another chance to buy something.

Currently, the physical market is very tight. If buyers have a chance to put their hands on physical metal, they should.  You never know the next time you’ll have a chance.

Disclosure:  I currently have positions in Sprott Physical Gold Trust and Sprott Physical Silver Trust.

1.5 Billion Sprott Physical Silver Trust Share Offering Closed

The 1.5 billion dollar Physical Silver Trust appears to have sold out, at least whatever allotment that TD Waterhouse reserved for their clients.  That took less than 24 hours.

Update:  The following article says that the PSLV raised only 270 million.  That is still an enormous amount of silver.

Sprott Physical Silver Trust Prices Follow-on Offering of Trust Units In An Aggregate Amount of US$269,575,000

New Public Offering ($1.5 billion) of Sprott Physical Silver Trust

Eric Sprott has publicly stated that he would like to be the to whom the silver market says that there is no more physical silver to be found and that they fail it is to him that it fails to deliver. Will this be the final squeeze that pushes out the paper market?

Sprott Physical Silver Trust Announces Follow-on Offering of Trust Units

Nov 8, 2012

TORONTO, Nov. 8, 2012 /CNW/ – Sprott Physical Silver Trust (the “Trust”) (NYSE: PSLV) (TSX: PHS.U), a trust created to invest and hold substantially all of its assets in physical silver bullion and managed by Sprott Asset Management LP, announced today that it has launched a follow-on offering (the “Offering”) of transferable, redeemable units of the Trust (“Units”).

The Trust will use the net proceeds of the Offering to acquire physical silver bullion in accordance with the Trust’s objective and subject to the Trust’s investment and operating restrictions described in the prospectus related to the Offering. Under the trust agreement governing the Trust, the net proceeds of the Offering per Unit must be not less than 100% of the most recently calculated net asset value per Unit of the Trust prior to, or upon determination of, pricing of the Offering.

The Units are listed on NYSE Arca and the Toronto Stock Exchange under the symbols “PSLV” and “PHS.U”, respectively. The Offering will be made simultaneously in the United States and Canada by underwriters led by Morgan Stanley and RBC Capital Markets in the United States and RBC Capital Markets and Morgan Stanley in Canada.

Copies of the U.S. prospectus related to the Offering may be obtained by contacting Morgan Stanley & Co. LLC, 180 Varick Street, 2nd Floor, New York, New York 10014 Attention: Prospectus Department (telephone 866-718-1649 (toll free) or 917-606-8474) or by e-mailing prospectus@morganstanley.com, or RBC Capital Markets, LLC, Attention: Prospectus Department, Three World Financial Center, 200 Vesey Street, 8th floor, New York, New York 10281-8098 (telephone: 212-428-6670, fax: 212-428-6260). Copies of the Canadian prospectus related to this Offering may be obtained by contacting RBC Capital Markets, Attention: Distribution Centre, 277 Front St. W., 5th Floor, Toronto, Ontario M5V 2X4 (fax: 416-313-6066) or Morgan Stanley & Co. LLC, 180 Varick Street, 2nd Floor, New York, New York 10014 Attention: Prospectus Department (telephone 866-718-1649 (toll free) or 917-606-8474) or by e-mailing prospectus@morganstanley.com. The Offering in Canada is only being made by the Canadian prospectus, which includes important detailed information about the Units being offered.

This news release does not constitute an offer to sell or a solicitation of an offer to buy the Units, nor shall there be any sale of the Units in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

SOURCE: Sprott Physical Silver Trust