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Like kind exchange

I hold precious metal bullion in a brokerage account. If I sell the bullion and buy the ETF that holds the corresponding bullion (e.g. iShares Silver Trust holds silver bullion & SPDR Gold Shares holds gold bullion), would that be deemed as like-kind exchange and defers the capital gains on selling the bullion?

If no, you can ignore the next question.

If yes: Bullion in the brokerage account is bought/sold by ounces; whereas the ETFs are bought by whole number of shares/units (i.e. no fractional shares). So, lets say I sell 10 ounces for $1,000 gross (and $950 net of commissions), do I buy enough whole shares to exceed the gross proceeds ($1,000) OR net proceeds ($950) -- in order to make the whole transaction tax-deferred?

TIA

Reply to
NoClue
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No. Not a like-kind exchange per IRC 1031(a)(2).

Reply to
D. Stussy

IRC 1031(a)(2) states:

(2) Exception This subsection shall not apply to any exchange of? (A) stock in trade or other property held primarily for sale, (B) stocks, bonds, or notes, (C) other securities or evidences of indebtedness or interest, (D) interests in a partnership, (E) certificates of trust or beneficial interests, or (F) choses in action.

I assume the applicable subsection is (B) or (C). Does that mean whenever there is securities (stocks/bonds/etf/mutual funds/etc.) involved -- on either buy or sell -- Section 1031 will not apply? e.g. there are many EFTs that tracks S&P 500 index. So I can sell/buy any of them; and don't have to worry about non-recognition of losses resulting from application of 1031 exchange -- assuming it is not a wash sale?

TIA

Reply to
NoClue

Correct. You're exchanging a commodity for paper representing an interest in the commodity. I would call the latter a security.

Reply to
D. Stussy

I think the question here is selling one EFT that tracks S&P 500 at a loss, and immediately buying a different EFT that tracks S&P 500. That isn't a wash sale, they're two different securities that happen to have similar goals.

Seth

Reply to
Seth

Yes, I realize that it is not a wash sale (since it involves 2 different securities). I am trying to confirm that the loss would not be deferred because of Sec 1031 Exchange -- securities are excluded form its application.

I believe Gold bullion have at least 2 EFTs. So, if I buy one of those EFTs; and later sell it at a loss; I can simultaneously buy the other gold EFT and maintain a position in bold bullion -- without any deferral of the capital loss.

Reply to
NoClue

A followup question.

If I sell a stock at a loss; then buy a Call option on that same stock. I assume that would not be a 1031 exchange. But would the wash sale rule apply in that case?

TIA

Reply to
NoClue

Right.

Yes, options are deemed to be sunstantially identical to their underlying security.

Reply to
Arthur Kamlet

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