@melomaniac007 wrote:
Thank you very much for the response. Since my Gold purchase 6 months ago, I'm under water with my purchase. So if I were to redeem it to be shipped to my house I would end up with less overall Gold because I would have to sell it back to the company (One Gold) and then place a new order with a third party (Apmex) to have that gold shipped to me. The company that I bought it from uses a third party company when redeeming one's gold. Is that still not a taxable event? Thanks.
STOP! And get some advice from a CPA or enrolled agent. You may get killed by the "wash sale rule."
To start with, let's look at what you are doing exactly. We'll suppose you bought 1 ounce of gold from #1 at $1900 per ounce. But, company #1 apparently won't send you that 1 ounce of physical gold, it's only "on paper." So you now sell 1 ounce back to #1 at $1700 per ounce, and buy 1 ounce of gold from #2 at $1700 which they send to your house.
Ordinarily, that is a $200 capital loss, that you can deduct. Then, the new ounce of gold has a cost basis of $1700, and your taxable profit will depend on the price when you sell. Suppose you sell in the future for $2000, that's a $300 capital gain. Your overall gain from the beginning is $100, and you paid tax on a $300 gain and deducted a $200 loss, so you end up being taxed on the correct overall gain of $100.
However, you must consider the wash sale rule. This is a rule that says that if you sell an investment at a loss, and buy "substantially the same" investment within 30 days, you can't deduct the loss.
You can add the loss to the price of the new investment. That means that, for tax purposes, the new gold you buy from #2 at $1700 has a cost basis of $1900 (the cost plus your $200 loss from company #1), so if you sell it at $2000, your taxable gain is the same $100. So no harm, no foul, right? In this simple case, yes. But in more complicated cases, or with trades that span multiple years, you can create a nightmare for yourself.
See this extreme case.
https://www.forbes.com/sites/shaharziv/2021/03/26/robinhood-trader-may-face-800000-tax-bill/?sh=6387...
At a minimum, you need to wait at least 30 days from the time you sell back your purchase to company #1 before you buy replacement gold from company #2.
You may want to get some advice from a professional tax advisor.
(Note that if company #1 would simply send you the gold you bought, that has no tax consequences at all. You would pay tax on your profit or deduct a loss whenever you sell it. What you can't do is take a loss on an investment and replace it with the same investment without waiting.)
