myICLUB Blog

With gold prices reaching all-time highs, many investors are looking to the precious metal as a safe haven during volatile market periods. But should investment clubs consider gold in their portfolios.

The short answer is a definitive no. Investment clubs should avoid holding gold or other precious metals in their portfolios due to how the IRS treats the gains and losses from them. The Internal Revenue Service considers gold and precious metal assets to be collectibles, not investments. These include physical gold bullion, coins, and ETFs that hold physical gold or metals. While long-term capital gains would typically carry a top bracket of 20%, collectibles can be taxed at a higher 28%. However, myICLUB Club Tax does not support IRS reporting of gains and losses of precious metals or gold, whether held directly or in an ETF. Clubs that hold gold or precious metals or ETFs will need to prepare their IRS tax returns manually or work with a professional tax preparer.

Commodities carry similar accounting headaches, whether owned directly or in an ETF. IRS tax code views commodities as property or collectibles, not as stocks. These as well as precious metals are best left for members in their own personal portfolios, and not held in their club portfolio.

One important distinction must be made for stocks of gold or precious metals mining companies. Companies like Royal Gold (RGLD) (covered in our SmallCap Informer newsletter) are common stocks and thus not subject to the same regulations as precious metals, and clubs that are interested in some defensive exposure may consider these companies for their portfolios without any concerns about tax reporting or treasurer headaches.

• DOUG GERLACH