Episode 18:Tax Advantages of Owning Gold


Gold is often seen as a hedge against inflation. In this episode, Tom also explains the tax opportunities gold investing may offer. Tom speaks with a precious metals broker who offers the risks and rewards of buying gold.


03:42 – Why Is Physical Gold A Better Investment Than Virtual Gold?

05:33 – Should Investors Expect To Make Money From Gold?

11:25 – What Tax Benefits Does Gold Offer?

17:12 – What Philanthropic Opportunities Does Gold Offer?

21:54 – How Can Gold Help With Estate Planning?

Learn more about Dana Samuelson and The American Gold Exchange by visiting https://www.amergold.com/

Speaker 1: This is the WealthAbility™ Show with Tom Wheelwright, way more money, way less taxes.

Tom Wheelwright: Welcome to The WealthAbility™ Show, where we're always learning how to make way more money while paying way less taxes. This is Tom Wheelwright, your host, founder and CEO of WealthAbility™.

Tom Wheelwright: And what if you could own assets that go up, way up, in value, and never pay tax on them? So today you're going to discover how to never pay tax on certain assets with amazing potential for gain.

Tom Wheelwright: So, today I'm very excited to have a good friend of mine, Dana Samuelson, who is really the gold and silver guy that I go to. He's the expert I rely on, we have email conversations, we talk about it. And Dana, it is absolutely fantastic to have you on The WealthAbility™ show today.

Dana Samuelson: Hi Tom. Well, thank you for having me. I'm honored to be here with you, and I really appreciate the opportunity to speak with you today.

Tom Wheelwright: So Dana, if you will, just give us a little of your background and, you know, why you should be talking about gold and silver, and basically what you do for a living, who you do it with.

Dana Samuelson: I'm president of American Gold Exchange, we're located in Austin, Texas. I started the American Gold Exchange in 1998, 20 years ago, after being in the business for 18 years. So, I've got almost 40 years in the business. This is all I do. I have a very vested interest in the price of gold because I have a large inventory, so it's something I watch every day, trade, and I watch the factors that influence the price of gold.

Dana Samuelson: And what we do is we're a physical precious metals dealership. We help people who are interested in owning physical precious metals make the right choices for what they're trying to accomplish. We deal in modern bullion coins. We also deal in classic, older US $10 and $20 gold coins that were currency back in the day, when gold coins were money. And we also do a fairly healthy volume of older European gold coins from the 1880s to the 1930s that are smaller, trading size gold coins that don't have the collector premium that you might expect for coins that are old.

Tom Wheelwright: That's interesting. So, you do the numismatic as well as the bullion. We're going to focus on the bullion today, and the gold coins that are not … don't have collector value. And the reason we're going to do that is because we can't do what we want to do with the other coins, okay? So, we can't … we don't get the same tax advantage with the collectors as we do with the bullion. So, we'll talk about that in a minute.

Tom Wheelwright: But I am curious as to you specialize in physical. Why … I know a lot of people are always asking the question, why would you buy physical gold versus an ETF that is much easier to deal with, much easier to handle, I mean, obviously much easier to store, right? It's easier to store a certificate than it is to store very weighty heavy metals. Why the physical?

Dana Samuelson: Well, physical precious metals is real, tangible wealth that you can hold in your hands. This is the most … the safest and oldest trusted store of value in the world going back to three, 4,000 years. So, physical precious metals are a way to have an asset in your hands that isn't simultaneously someone else's liability.

Dana Samuelson: ETFs are a good way to trade the precious metals markets cost effectively. If you think the price is going to rise or fall, and you want to harness that, ETFs, like GLD for gold or SLV for silver, are an excellent way to cost effectively harness the markets on a trading aspect.

Dana Samuelson: But if you want to have gold and silver as a currency, or a way to transport wealth, or transfer wealth, that's what physical precious metals are for. They're not quite as competitively traded, percentage wise, as ETFs are, because you have to pay a mint to make a product, the integrity of the product has to be there, there's a manufacturing charge. It's not very much, but it's still not quite as tight as you would see with an ETF or with a stock.

Tom Wheelwright: I'm sitting here soaking this all in. And by the way, for our listeners, we have a bonus that I'll talk about more specifically later in the show, so keep listening. Dana is a wealth of knowledge.

Tom Wheelwright: So, you mention that it is a store of value. So, when you say that it sounds like, well, do I buy this to make money, or is this something that's more of a hedge for inflation?

Dana Samuelson: Well, it's both. There are times in the price cycle when gold makes and excellent investment. Right now the price has been a little weaker because the US economy has been strong, so over the last six months the price has come down about seven or eight percent, the dollar's been strong. So, as an investment it's a little weaker right this moment, which actually makes it a good buy.

Dana Samuelson: But what gold really is for most people is a hedge against inflation, or a hedge against financial turmoil. It worked perfectly as that during the financial crisis. Gold went from, in 2008, between $800 and $1,000 all the way up to $1,900 by 2011 because there was a crisis of confidence in all paper assets, and stocks were hit, currencies were hit.

Dana Samuelson: That's what gold is really for, and if your people think about it this way, it's an insurance policy for the rest of your money. Most financial advisors will tell you having five to 10% of your assets in gold as a counterbalance against your traditional assets is a good hedge, and that's the way we look at it.

Dana Samuelson: If you have an insurance policy for your health, or for your life, or for your car, or for your house, every six months or a year you've got to write another check as that policy expires. If you place a golden insurance policy in your financial asset package you're always going to have 75 to maybe 125% of that premium in the form physical gold, depending upon when you bought it in the price cycle and what's happening.

Tom Wheelwright: So where are we now, do you think, in the price cycle? I know a lot of people will go, well, it's coming down, is it going to keep coming down is the big question. And so is now, like you say, it's a lot better time to buy than a year ago when it was considerably higher. Is it going to keep going down? Where do you see it going? I mean, I know you don't have a crystal ball, but you mention that it's kind of contrary to how strong the dollar is, so, I mean, you and your gold buddies, what are you talking about right now?

Dana Samuelson: Well, in the big picture, gold is inversely correlated to the dollar, and the dollar is fundamentally influenced by the strength or weakness of the US economy. And over the last couple of years we've seen a situation where the US economy is stronger than the economies in Europe, the Euro Zone, Japan. China has been pretty good until this past six, eight, 12 months, it's been in a weakening phase.

Dana Samuelson: So, the US is clearly stronger, and we've turned in, in the second quarter of this year, the best GDP we've had since the summer of 2014. So, the dollar has been stronger over the last couple of months, and that's helped to break gold from the trading range that it had been in for most of the last year, of 1,275 to 1,350 down to 1,200. It's actually about 1,190 right now.

Dana Samuelson: If you look at the bigger picture going back, gold ran from $500 an ounce in 2004 all the way to 1,900 in 2011. It's come back and corrected strongly as the US economy improved, starting in 2014, and the fed tightening by raising interest rates for the first time in December of 2015 to a low of 1,050 to 1,350. So, that's a $300 price range, 1,050 to 1,350. And right now, at 1,200, we are right smack in the middle of that range, almost perfectly right in the middle of that range.

Dana Samuelson: Because there is so much debt in the world today that has been created over the last 10 years to help us come out of the great recession, governmental debt, private debt, has exploded from 97 trillion 10 years ago, worldwide, to 169 trillion today, a 70% increase in worldwide debt, I don't think the world is going to let gold get very cheap again. And in fact, I think the 1,050 bottom we have in December 2015, is a really hard bottom.

Dana Samuelson: I think if gold was going to get weaker it would do that now, in this environment, with the US stronger, and the dollar stronger, and we would see gold actually lower than it is today. The fact that it's holding in the middle of the big range it's been in for the last three or four years, to me, is a very positive sign. So, this is a good dip to buy, actually, I think.

Tom Wheelwright: Interesting. And, you know, of course we always talk about dollar cost averaging, right? So if you bought in the 1,300, 1,350 range, that maybe now is the time to buy so that you bring that average down of your average cost. Does that make sense?

Dana Samuelson: Yes, anyone that wants to participate in this market, it's an emotional market, and it's emotional choice for some people, but if you look at it rationally from more of a trading aspect, dollar cost averaging is really a smart way to go, to incrementally make steady purchases over a period of time with the amount of money that you want to invest. That helps you get the best cost per average that you're going to get, and it certainly would help people take advantage of this dip now.

Tom Wheelwright: So, one of the things that I like about physical gold is that you can buy one coin, right? So, you can buy one ounce of gold, or you can buy one ounce of silver. You know, if you don't have enough money to buy an ounce of gold, you can buy an ounce of silver. And I like that, because I … I like it for my kids, all right? So, I'm starting them with gold coins right now. So, I'm very excited about that.

Tom Wheelwright: The other thing, of course, I get excited about, as you know, Dana, I always get excited about the tax side of it. So, I want to talk just a few minutes about the tax side, which is, I know, more my specialty than yours.

Tom Wheelwright: But the reality is that gold and silver, they're an asset, a capital asset from a tax standpoint. They don't have the same tax consequences, though, that other capital assets have, like stocks would have. So when you sell, instead of paying a 15 … anywhere from a 15 to 20% rate, you actually end up paying a 28% rate because there's that flat capital gains rate for precious metals.

Tom Wheelwright: So, this gives us an opportunity. Because you're not going to … I mean, you're not suggesting, Dana, are you, that … for physical gold, that you're going to frequently buy and sell it, right? This is something you're going to buy and hold for a very long period of time. Does that make sense?

Dana Samuelson: Yes, most of the investors who deal with my firm are buy and hold investors. Some are traders that want to, perhaps, arbitrage one metal against another. For example, silver is just really cheap compared to gold right now. We measure that by the gold to silver ratio, which is at a high right now of over 80 to one. So, 80 parts silver equals one part gold. That is traditionally a high. So, we'll get some trading back and forth to take advantage of anomalies that develop in the market, but most investors that take physical possession keep it, and they are buy and hold investors, in essence.

Tom Wheelwright: So, that leads to a tax opportunity, because we have, in the US, what we call a Roth IRA, which … or a Roth 401(k), which allows us to buy … invest in something within that IRA or 401(k), and when we sell it, or we recognize the gain, we realize the gain, we never pay tax.

Tom Wheelwright: So, I want you all to imagine … And see, I've got somebody from Texas on the podcast, so now I'm saying y'all again, which I … Two things I learned at the University of Texas other than tax was I learned y'all, and I learned the plural of y'all, which everybody should know is all y'all.

Dana Samuelson: All y'all, yes, sir.

Tom Wheelwright: Exactly. See, that's how you know that … That's how you confirm that somebody actually has lived in Texas, they actually know that it's all y'all.

Tom Wheelwright: So, when y'all, or all y'all, are thinking about buying this gold or silver, and you're thinking, wow, what if it goes up to $10,000, which is always the range that people … you know, they always … I always hear gold people put out $10,000, that's the number, or for silver it's $1,000.

Tom Wheelwright: What if it goes up that much? Wow, I mean, you think about it, now you've got, between state and local taxes, I'm sorry, between state and federal taxes, you're going to pay tax of about a third.

Tom Wheelwright: So, let's say it went from 1,200 to just double that 2,400, so you've doubled your money, but you really haven't doubled your money, because you're going to pay a third of that increase, that $1,200, you're going to pay $400 in tax on that. So instead you can buy in your Roth IRA, or in your Roth 401(k).

Tom Wheelwright: And the reason I bring up the bullion versus the numismatic, the collectibles, is you can't put collectibles in an IRA, okay?

Dana Samuelson: That's … Yeah, that's correct.

Tom Wheelwright: So, we want to put bullion, but we can put gold eagles, we can put real coins like that, in an IRA, we can put it in a 401(k), and it's okay that it's physical gold. So all you do is you just have your IRA or your 401(k) actually buy the gold, so you talk to your administrator, have them buy the gold or the silver from Dana, for example.

Tom Wheelwright: And when you do that, then you've got it titled. Now you're going to store it wherever you're going to store it, right? And, you know, whether that's … whether you trust the banks and you want to store it in a safe deposit box. I'm not sure I trust the banks more than I trust a private storage facility because banks are subject to so much regulation. And, you know, maybe you actually want that storage facility down the street that is not that secure but, guess what? Nobody knows you've got gold in there.

Tom Wheelwright: So, you know, I think everybody has an idea of where to store their gold. But the reality is there's absolutely no issue with an IRA buying from you, right?

Dana Samuelson: Correct. That's correct. We do a lot of business with IRAs for that reason, who are either traditional IRAs, where there are specialty custodians whose fees are good, or you can store yourself if you want. And what most people don't realize is that $100,000 worth of gold is smaller than the average paperback novel in size. So, finding a place to cubbyhole that, that you feel safe and secure about, is pretty easy to do, doesn't take up much room. And that's why gold is popular as a wealth vehicle, because a small amount of it carries a lot of value.

Tom Wheelwright: Yeah, $100,000 of silver, not so much.

Dana Samuelson: No, that's a wheelbarrow full or more, yes, sir.

Tom Wheelwright: That's a lot of silver. That's a lot of, lot of silver.

Tom Wheelwright: What I like is a combination, because, of course, I'm thinking down the road, at some point, you may have to spend this money. You know, if you had a banking system collapse, then you would actually use your gold and your silver to spend, but it's pretty hard to spend an ounce of gold that's $10,000. How are you going to get change for that? Whereas an ounce of silver, you know, that's $500, may be a lot easier to buy groceries with that $500 piece of silver.

Tom Wheelwright: You know, there's another tax opportunity here that I don't think … I rarely hear anybody talk about, and that is that a lot of our listeners are very charitably minded, so they're thinking about can I … you know, I want to give something to charity either now or when I die, and what can I do?

Tom Wheelwright: And one of the great benefits of an appreciating asset that's a capital gain asset like gold and silver is when you donate it … Now, Dana, do you think charities would be okay getting gold and silver?

Dana Samuelson: Oh, absolutely, and we have some specific examples of that happening here locally in Austin over the last 20 years we've been in business. We've had a couple of clients who have amassed portfolios of physical gold and have given it to their churches. And we have, once in a while, one of the church officials will come in and liquidate a little bit to raise a little cash when they need it.

Tom Wheelwright: Well, there you go. So, I mean, it's so easy to liquidate. I mean, there's always a buyer. And yes, I mean, you're not going to sell it at the same price you buy it. It's kind of like foreign exchange, right? You go buy a euro, and it's not the same price as when you go to sell your euro a week later on the back end of your vacation. And you have to remember that, this is a long term situation.

Tom Wheelwright: But the reality is if you donate that … So, let's say it's gone from $1,200 to $10,000, that $8,800 of gain is not going to be taxed, and you're going to get a deduction for $10,000. So, this is what people don't often think about when it comes to highly appreciating assets, that …

Tom Wheelwright: You know, let's say that you go, I don't want them in an IRA. I don't want that kind of restriction. Or I've got … I can't put that much into an IRA because I don't have that big of an IRA. So, you want to … you have some personally. You can think about this as okay, but maybe this is something that down the road, maybe this is something when I get a little older, and I'm secure, or it's really gone up in value, that I want to gift to a charity, to the charitable causes, I actually think the idea of paying tithing with a gold coin, frankly, that makes a lot of sense to me.

Dana Samuelson: I agree. I didn't realize the tax benefits that you just explained, which is why your podcast is so successful, Tom.

Tom Wheelwright: Oh, thank you, but I just think that, you know, what a nice idea. And then here's another thing, by the way, just to throw out one more idea here, let's say that it goes up to … let's say you get a spike, like we got that spike to 1,900. Let's say we get another spike to, like, 1,900, 2,000, something like that. Let's say we have the next … you know, the next big crash, which people are anticipating is going to come in the next couple of years.

Tom Wheelwright: Let's say we have that, and gold goes up to that $2,000. Well, we can actually, at that point, give the gold in trust, and we actually give it to the charity, and we can give it to them in the future. So we can actually donate it now, get the charitable deduction now based on the current value, but not actually turn over the gold until we die.

Tom Wheelwright: And that's what's called a charitable remainder trust. People don't typically think about it with gold and silver, but it is something where you … And then, if you need it, let's say you want to trade against it like an Andy Tanner, I know you know Andy, Dana. Andy Tanner would talk about, well, look, why don't you write options against it. You can do a covered call with the physical gold that you have, just like you can do a covered call with an ETF.

Tom Wheelwright: So, you can do a covered call there, and you just … you write that option, and you're making money on the option. If you ever have to deliver, you deliver the … you know, you'd have to deliver the physical gold, but you'd actually have it there, and you'd have access to that even though you've got a charitable donation, because you've given it to the charity for when you die.

Dana Samuelson: That's brilliant, Tom. That's just brilliant.

Tom Wheelwright: So I just think … You know, I'm always looking for what can I do to keep control of my assets, right? How can I keep control of my assets, still use my assets, and get a tax benefit? And these are just a couple of things that you can do.

Tom Wheelwright: So, I just think … I personally, you know, I'm not a financial advisor. I will say that I like the idea of gold and silver just because … And like you say, I mean, it's not something you want to put your whole portfolio in, but the reality is that if you look at wealthy families throughout the centuries, how have they maintained … how have they passed on their wealth?

Tom Wheelwright: And typically, they say, they've passed it on in three ways. They pass it on through real estate, they pass it on through art, museum quality art, and they pass it on through gold and silver. So, you really want to think about your legacy. You want to think about something, like Dana says, a store of value.

Tom Wheelwright: Dana, once again, give us your company name and how to contact you.

Dana Samuelson: Our company is American Gold Exchange. Our website, which is full of information, transparent pricing, and our general email box is info at A-M-R-G-O-L-D dot com.

Tom Wheelwright: I've dealt with Dana before, and it's never high pressure, and it's always … you know, I always appreciate the information.

Tom Wheelwright: So, the type of advisors that I always look for, and that I always recommend, are people that will take the time and, you know, are really about explaining what's going on, finding out what's going on with you, and making sure it's a good fit, rather than saying, yeah, you need to buy, buy, buy right now, because you never know when it's going to go back up.

Tom Wheelwright: Which, you know, we don't buy gold and silver because we're really worried about the price so much. We're buying gold and silver because we're worried about the economy as opposed to the price. So, it's not something you have to track every day. It's something you pretty much can just forget about. And think about, there's amazing tax benefits here.

Tom Wheelwright: So, thank you very much, Dana. Thanks everyone for listening. One of the asset classes we like to talk about, of course, is the asset class of commodities, gold and silver are one of those, and they're a little … they're unique in the way they function as a store of value, the way they function as a hedge against inflation and against the economy, because we all know that the economies go up, and economies come down, and so this is an opportunity.

Tom Wheelwright: So, just an idea to think about, talk about with your tax advisor, talk about with your financial advisor, and if … you know, if this is something that you want to think about, think about how to own it, not just to own it, but how should I own this, and how do I get the tax benefits that I want to get from gold and silver. When you focus on how you're investing, and you really look at the tax benefits, and do it the right way, you always are … you're always going to make way more money while you're paying way less tax.

Tom Wheelwright:
Tom Wheelwright:
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