Cash for gold not necessarily exempt from tax

October 31, 2009 by Dan White.

The government wants tax whereever possible. There is the never ending hunt for money by the  Canada Revenue Agency… As a result a lot of Canadians finding themselves with tax problems. To avoid being in trouble and need soltutions, be sure you know what is taxable and what is not.

If you are invited to a gold party, or you sell your gold at Cash Converters, be sure to be aware how to handle this in your bookeeping.

Cash for gold not necessarily exempt from tax

Here is another great article by amie Golombeck, writing for hte Gazette.

It is interesting that if you buy gold jewelery (excluding gold coins) and the adjusted tax base is less than $1,000 and you sell it for less than $1,000 then it is tax free.  However if either is over $1,000, then you have a capital gain or loss to claim on your tax return.

So… so long as you don’t make a business of buying and selling gold jewelery, and other listed personal property, it is a good way to come up with either tax free or low tax dollars.

Interesting,,, eh?

Dan White

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Jewellery sales can result in capital gains

By JAMIE G OLOMBEK, The GazetteOctober 31, 2009

It seems everywhere you look, there is someone lining up to buy all that unwanted gold you’ve been hoarding. It started last year with the pawn shops and jewellery stores, some of which have taken to running non-stop TV ads in local markets depicting smiling owners and customers excitingly waving stacks of cash.

No doubt the meteoric rise in the price of gold over the past year, which hit a record high this month, topping US$1,064 an ounce, has prompted people to consider turning their unworn gold jeweller y into cold hard cash.

Last week, I was invited to my first cash-for-gold party, to which partygoers are asked to bring their unwanted gold for a free no-obligation appraisal.

These “parties” are promoted as win-win-win: The buyer gets the gold, the seller gets cash and the host collects up to 10% of the total transaction value that night.

If this sounds tempt - ing, consider the tax consequences of selling your gold for cash. Here’s a quick review of the rules: While a coin dealer who purchases gold coins from an individual has an obligation to report the sale to the Canada Revenue Agency and issue a T5008 tax slip to the seller, there is no such reporting requirement for gold jewellery. The seller, on the other hand, may have an obligation to declare any gains from the sale of jewellery on her tax return since jewellery is considered “listed personal property” (LPP).

LPP is a special category of personal-use property, meaning items you own for your personal use and enjoyment, such as furniture, cars or boats.

While most personal-use property depreciates over time, LPP usually increases in value over time. Listed personal property includes jewellery, works of art, rare books, stamps and coins.

The sale of personal-use property, including LPP such as jewellery, can result in a capital gain, but it’s calc ulated based on special rules. Under these rules, if the amount you paid your adjusted cost base, or ACB) is less than $1,000, it’s deemed to be $1,000 for tax purposes.

Similarly, if the cash you receive for your jewellery is less than $1,000, your proceeds of disposition for tax purposes are considered to be $1,000.

The practical result of these rules is that if both the ACB and the cash you receive for your gold jewellery are less than $1,000, you don’t have to report any gain or loss.

A capital gain from the sale of jewellery must be reported on Schedule 3 of your personal tax return.

A capital loss, however, is considered to be an “LPP loss,” which can only be deducted against other LPP gains. Any unused LPP losses can be carried back three years or carried forward for seven years.

Financial Post Jamie.Golombek@cibc.com

Jamie Golombek, CA, CPA, CFP, CLU, TEP, is the managing director of tax and estate planning with CIBC Private Wealth Management in Toronto.

tax These ‘parties’ are promoted as win-win-win
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