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current law, gains recognized by individuals, estates or trusts from the sale of “collectibles,” including physical |
gold, held for more than one year are taxed at a maximum federal income tax rate of 28%, rather than the 20% rate applicable to |
most other long-term capital gains. For these purposes, gains recognized by an individual upon the sale of Shares held for more |
than one year, or attributable to the Trust’s sale of any physical gold which the Shareholder is treated (through its |
ownership of Shares) as having held for more than one year, generally will be taxed at a maximum rate of 28%. The tax rates for |
capital gains recognized upon the sale of assets held by an individual US Shareholder for one year or less or by a corporate taxpayer |
are generally the same as those at which ordinary income is taxed. In |
addition, high-income individuals and certain trusts and estates are subject to a 3.8% Medicare contribution tax that is imposed |
on net investment income and gain. Shareholders should consult their tax advisor regarding this tax. Brokerage |
Fees and Trust Expenses Any |
brokerage or other transaction fees incurred by a Shareholder in purchasing Shares is treated as part of the Shareholder’s |
tax basis in the Shares. Similarly, any brokerage fee incurred by a Shareholder in selling Shares reduces the amount realized |
by the Shareholder with respect to the sale. Shareholders |
will be required to recognize a gain or loss upon a sale of gold by the Trust (as discussed above), even though some or all of |
the proceeds of such sale are used by the Trustee to pay Trust expenses. Shareholders may deduct their respective pro rata share of |
each expense incurred by the Trust to the same extent as if they directly incurred the expense. Shareholders who are individuals, |
estates or trusts, however, may be required to treat some or all of the expenses of the Trust, to the extent that such expenses may |
be deducted, as miscellaneous itemized deductions. Miscellaneous itemized deductions, including expenses for the production of |
income, will not be deductible for either regular federal income tax or alternative minimum tax purposes for taxable years beginning |
after December 31, 2017 and before January 1, 2026 and thereafter generally are (i) deductible only to the extent that the aggregate of a Shareholder's miscellaneous itemized deductions |
exceeds 2% of such Shareholder's adjusted gross income for federal income tax purposes, (ii) not deductible for the purposes of the alternative |
minimum tax and (iii) are subject to the overall limitation on itemized deductions under the Code. 22 Investment |
by Regulated Investment Companies Mutual |
funds and other investment vehicles which are “regulated investment companies” within the meaning of Code section |
851 should consult with their tax advisors concerning (1) the likelihood that an investment in Shares, although they are a “security” |
within the meaning of the Investment Company Act of 1940, may be considered an investment in the underlying gold for purposes |
of Code section 851(b), and (2) the extent to which an investment in Shares might nevertheless be consistent with preservation |
of their qualification under Code section 851. In administrative guidance, the IRS stated that it will no longer issue |
rulings under Code section 851(b) relating to the determination of whether or not an instrument or position is a “security”, |
but, instead, intends to defer to guidance from the SEC for such determination. United |
States Information Reporting and Backup Withholding Tax for US and Non-US Shareholders The |
Trustee or the appropriate broker will file certain information returns with the IRS, and provides certain tax-related information |
to Shareholders, in accordance with applicable Treasury Regulations. Each Shareholder will be provided with information regarding |
its allocable portion of the Trust’s annual income (if any) and expenses. A |
US Shareholder may be subject to US backup withholding tax in certain circumstances unless it provides its taxpayer identification |
number and complies with certain certification procedures. Non-US Shareholders may have to comply with certification procedures |
to establish that they are not a US person in order to avoid the backup withholding tax. The |
amount of any backup withholding tax will be allowed as a credit against a Shareholder’s US federal income tax liability |
and may entitle such a Shareholder to a refund, provided that the required information is furnished to the IRS. Income |
Taxation of Non-US Shareholders The |
Trust does not expect to generate taxable income except for gains (if any) upon the sale of gold. A Non-US Shareholder generally |
is not subject to US federal income tax with respect to gains recognized upon the sale or other disposition of Shares, or upon |
the sale of gold by the Trust, unless (1) the Non-US Shareholder is an individual and is present in the United States for |
183 days or more during the taxable year of the sale or other disposition, and the gain is treated as being from United States |
sources; or (2) the gain is effectively connected with the conduct by the Non-US Shareholder of a trade or business in the United |
States. Taxation |
in Jurisdictions other than the United States Prospective |
purchasers of Shares that are based in or acting out of a jurisdiction other than the United States are advised to consult their |
own tax advisers as to the tax consequences, under the laws of such jurisdiction (or any other jurisdiction not being the United |
States to which they are subject), of their purchase, holding, sale and redemption of or any other dealing in Shares and, in particular, |
as to whether any value added tax, other consumption tax or transfer tax is payable in relation to such purchase, holding, sale, |
redemption or other dealing. 23 ERISA |
and Related Considerations The |
Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and/or Code section 4975 impose certain requirements |
on certain employee benefit plans and certain other plans and arrangements, including individual retirement accounts and annuities, |
Keogh plans, and certain commingled investment vehicles or insurance company general or separate accounts in which such plans |
or arrangements are invested (collectively, “Plans”), and on persons who are fiduciaries with respect to the investment |
of “plan assets” of a Plan. Government plans and some church plans are not subject to the fiduciary responsibility |
provisions of ERISA or the provisions of section 4975 of the Code, but may be subject to substantially similar rules under other |
federal law, or under state or local law (“Other Law”). In |
contemplating an investment of a portion of Plan assets in Shares, the Plan fiduciary responsible for making such investment should |
carefully consider, taking into account the facts and circumstances of the Plan and the “Risk Factors” discussed above |
and whether such investment is consistent with its fiduciary responsibilities under ERISA or Other Law, including, but not limited |
t (1) whether the investment is permitted under the Plan’s governing documents, (2) whether the fiduciary has the authority |
to make the investment, (3) whether the investment is consistent with the Plan’s funding objectives, (4) the tax effects |
of the investment on the Plan, and (5) whether the investment is prudent considering the factors discussed in this report. In |
addition, ERISA and Code section 4975 prohibit a broad range of transactions involving assets of a plan and persons who are “parties |
in interest” under ERISA or “disqualified persons” under section 4975 of the Code. A violation of these rules |
may result in the imposition of significant excise taxes and other liabilities. Plans subject to Other Law may be subject to similar |
restrictions. It |
is anticipated that the Shares will constitute “publicly offered securities” as defined in the Department of Labor |
“Plan Asset Regulations,” §2510.3-101 (b)(2) as modified by section 3(42) of ERISA. Accordingly, pursuant to |
the Plan Asset Regulations, only Shares purchased by a Plan, and not an interest in the underlying assets held in the Trust, should |
be treated as assets of the Plan, for purposes of applying the “fiduciary responsibility” rules of ERISA and the “prohibited |
transaction” rules of ERISA and the Code. Fiduciaries of plans subject to Other Law should consult legal counsel to determine |
whether there would be a similar result under the Other Law. Investment |
by Certain Retirement Plans Code |
section 408(m) provides that the acquisition of a “collectible” by an individual retirement account (“IRA”) |
or a participant-directed account maintained under any plan that is tax-qualified under Code section 401(a) (“Tax Qualified |
Account”) is treated as a taxable distribution from the account to the owner of the IRA, or to the participant for whom |
the Tax Qualified Account is maintained, of an amount equal to the cost to the account of acquiring the collectible. The term |
“collectible” is defined to include, with certain exceptions, “any metal or gem”. The IRS has issued several |
private letter rulings to the effect that a purchase by an IRA, or by a participant-directed account under a Code section 401(a) |
plan, of publicly-traded shares in a trust holding gold will not be treated as resulting in a taxable distribution to the IRA |
owner or Tax Qualified Account participant under Code section 408(m). However the private letter rulings provide that, if any |
of the Shares so purchased are distributed from the IRA or Tax Qualified Account to the IRA owner or Tax Qualified Account participant, |
or if any gold is received by such IRA or Tax Qualified Account upon the redemption of any of the Shares purchased by it, |
the Shares or gold so distributed will be subject to federal income tax in the year of distribution, to the extent provided |
under the applicable provisions of Code sections 408(d), 408(m) or 402. Accordingly, potential IRA or Tax Qualified Account investors |
are urged to consult with their own professional advisors concerning the treatment of an investment in Shares under Code section |
408(m). Item |
1A. Risk Factors Shareholders |
should consider carefully the risks described below before making an investment decision. Shareholders should also refer to the |
other information included in this report, including the Trust’s financial statements and the related notes. 24 RISKS |
RELATED TO GOLD The |
price of gold may be affected by the sale of ETVs tracking the gold markets. To |
the extent existing exchange traded vehicles (“ETVs”) tracking the gold markets represent a significant proportion |
of demand for physical gold bullion, large redemptions of the securities of these ETVs could negatively affect physical gold bullion |
prices and the price and NAV of the Shares. Crises |
may motivate large-scale sales of gold which could decrease the price of gold and adversely affect an investment in the Shares. The |
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