o
a guy I know is a hard metals investor
he claims that investing in gold can be a "tax free" investment
he goes in and buys gold coins with cash, like the Eagle
later he goes in and sells them for the higher price
these transactions do not show up on his taxable income record
unlike with a mutual fund or stock transaction that reports a profit to his SS number
of course he wouldnt be able to report a loss either and he does have the problem of storage
he has a large safe
if he makes a 30K profit from a hard money transaction
it's "tax free" because the IRS has no way of knowing about it because it doesn't show on his 1099
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Well, you said it all. He can't deduct his losses and is every bit as likely to have a loss on gold coins as a profit. Gold is unpredictable and volatile, and unlike gold stocks, there is a markup on those coins when you buy them as well as a markdown when you sell them. Then there is the theft factor, so if he gets robbed, he can't even deduct the loss or the insurance as an expense if he doesn't get robbed.
Plus, he is a tax cheat, and unless he gets paid in paper money or coins, he can be caught and fined. The government traces all withdrawals and deposits of $5000 and up.
He could do the same thing legally by putting his money in a Roth IRA in a gold fund. Of course, this assumes he has income below $75K annually or so.
I'd call this strategy "too clever by half."
People whose strategy is to avoid taxes before making a profit are basically shooting themselves in the foot. I would rather maximize profits, pay the taxes and avoid the hassle.
