Summary: Understanding the Real Tax Story Behind IAUM Holdings
Investors often underestimate the complexity of U.S. tax rules around gold-backed ETFs like IAUM. This article unpacks the nuanced tax considerations, drawing from real-world experience, IRS rules, and industry commentary. If you’re unsure whether IAUM’s tax treatment could surprise you at filing time, or how it compares to similar products, let’s dig in—mistakes here can easily cost you more than you expect.
Why IAUM’s Tax Treatment Isn’t as Simple as It Looks
When I first considered adding iShares Gold Trust Micro (IAUM) to my portfolio, I assumed its tax implications would be like any other ETF. Turns out, I was wrong—thanks to how the IRS classifies “grantor trusts” holding precious metals.
IAUM is structured as a grantor trust, which is a key point. According to the IRS Revenue Ruling 2006-31, gold ETFs structured this way are treated for tax purposes as if you own a pro-rata share of the underlying gold, not just shares of an investment fund.
Let’s break this down into what actually happens when you buy, hold, and eventually sell IAUM shares—complete with some personal mishaps and what I wish I’d known before clicking “buy.”
Step-by-Step: What Happens When You Buy and Sell IAUM
- Buying IAUM: You’re technically buying fractional ownership of physical gold held in trust. Even though it trades like a stock, the IRS sees you as a direct gold owner.
- Holding IAUM: There are no annual dividends or interest distributions. No income is reported until you sell. However, your cost basis is your purchase price plus any transaction fees.
- Selling IAUM: Here’s where it gets tricky. When you sell, you’re taxed as if you sold physical gold. This means gains are treated as “collectibles” gains, which have a maximum federal tax rate of 28%, not the typical 15%-20% long-term capital gains rate for stocks and most ETFs.
I remember selling some IAUM after holding it for more than a year, expecting the usual capital gains rate on my modest profits. But my 2022 tax software flagged the transaction for “collectibles” treatment. After a mild panic and several hours on the Bogleheads forum, I realized this was correct. The IRS guidance is clear: gold ETFs structured as grantor trusts do not get the preferential rates most stocks or equity ETFs do.
Screenshot: How IAUM Sales Show Up in Tax Software
When I imported my brokerage 1099-B into TurboTax, the sale of IAUM was listed with a code indicating “collectibles.” The help text linked directly to IRS Topic 409 - Capital Gains and Losses, confirming that these gains are subject to up to 28% federal tax.
Expert Take: Why U.S. Tax Rules Treat Gold ETFs Differently
I reached out to a CPA friend with experience in ETF taxation. He explained: “Many investors are caught off guard. Even if you hold IAUM for more than a year, the IRS classifies it as a collectible under 26 U.S. Code § 1 and Revenue Ruling 2006-31. Unless you’re a dealer, gains are capped at 28% for long-term holdings, which is higher than most long-term capital gains.”
He also pointed out that the reporting can be inconsistent. “Some brokerages don’t always mark the transaction as a collectible, which can lead to filing errors. You need to double-check your 1099-B and your tax software’s classification.”
Table: International Differences in “Verified Trade” Standards for Gold ETFs
| Country | Standard Name | Legal Basis | Enforcement Agency |
|---|---|---|---|
| United States | Grantor Trust (Collectibles Taxation) | IRS Rev. Rul. 2006-31 | Internal Revenue Service (IRS) |
| Canada | Mutual Fund Trust (Capital Gains) | CRA T4037 | Canada Revenue Agency (CRA) |
| European Union | UCITS ETF (Gold as Security) | UCITS Directive | European Securities and Markets Authority (ESMA) |
Case Study: U.S. vs. Canada—Selling a Gold ETF
Let’s say you buy $10,000 of IAUM in the U.S. and $10,000 of a similar gold ETF in Canada. After two years, both positions have grown to $12,000. You sell.
- In the U.S.: The $2,000 gain is taxed as a collectible at up to 28%. If you’re in the 24% income bracket, you still pay 28% on this gain.
- In Canada: The same $2,000 gain is taxed as a capital gain, only half of which is taxable at your marginal rate (see CRA guidance).
The difference is stark. That extra 8-13% tax bite in the U.S. can make a real dent in your returns, especially if you trade these products regularly.
Industry Expert: “Don’t Assume All ETFs Are Created Equal”
In a recent ETF.com interview, tax advisor Mark Luscombe warned: “We see confusion every year. Investors buy gold-backed ETFs thinking they’ll get the same treatment as stock funds. But the IRS rules are clear: grantor trust ETFs holding physical gold are taxed as collectibles, even if you never take delivery of the metal.”
His advice? “If you want lower tax rates, consider gold mining equity funds or futures-based products, but be aware those have their own quirks.” (Source: ETF.com)
Real-World Headaches: What to Watch Out For
Personally, my biggest mistake was not checking the “collectibles” box in my tax software the first year I sold IAUM. The IRS sent me a notice months later, and I had to amend the return—plus pay a small penalty. Lesson learned: always verify how your broker reports these sales, and don’t assume they’ll do it right. I found a thread on Reddit where others had similar issues, with some reporting that major brokers like Fidelity and Schwab sometimes misclassify these sales.
The other headache? IAUM isn’t eligible for the lower tax rates in Roth IRAs or other tax-advantaged accounts if you withdraw early—they’re still considered collectibles for early distributions (see IRS IRA FAQs).
Conclusion: Stay Ahead of the Tax Curve with IAUM
IAUM can be a convenient and cost-effective way to gain gold exposure, but its tax treatment is fundamentally different from most ETFs. Don’t sleepwalk into “collectibles” tax rates—double-check your broker’s 1099-B, use tax software that handles precious metals ETFs correctly, and consider your holding period and account type. If you’re unsure, a quick consult with a tax advisor is worth it—trust me, it beats getting a letter from the IRS.
Next steps? Review your current gold ETF holdings, look at your cost basis, and if you’re thinking about selling, run the numbers for both regular and collectibles rates. And if you’re a frequent trader, maybe look at alternatives like gold mining stocks or futures-based ETFs, but only after reading up on their own tax rules.
For further reading, check out these resources:
- IRS Revenue Ruling 2006-31 (official treatment of precious metals ETFs)
- ETF.com on ETF tax quirks
- Bogleheads forum: IAUM and tax reporting