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I bought CEF from broker. If I sell do I get 15% long term gain witn=hout special forms?
Tennessee Already Tried: My broker says the answer is very complicated. There may be special forms which need to be dealt with. Any experienced sellers.
Generally - the abbreviation CEF reads as Closed-End Fund - if you sell shares - that were held more than a year - the gain will be treated as long term - taxable at reduced rate - not more than 15%
If you mean CEF - Central Fund of Canada Limited - http://finance.yahoo.com/q?d=t&s=CEF - that is a commodity mutual fund and invests in the commodity markets - primarily in silver and gold.
The first issue that owning CEF is equivalent to owning physical bullion - but gold and silver bullion is a "collectible." and not eligible for 15% long-term capital gains rate - instead, it is taxed at up to 28% rate for long-term gains.
CEF, on the other hand, should be eligible for the 15% rate - that is a "passive foreign investment company" (PFIC) - so by filling the form 8621 - http://www.irs.gov/pub/irs-pdf/f8621.pdf , and making the qualified electing fund (QEF) election, CEF should qualify to be treated as QEF. You should file this form in every year which you own the shares -see more information in this article - http://www.offshorepress.com/offshoretax/otpfic.htm
Please provide the information above to your tax preparer - I agree with your broker - that is very complicated issue.
I know this blah, blah. But the broker (Schwab) had held the stock for years. If I just sell what happens? SOMEONE must have sold a long held Central Fund of Canada.
There would not be any issue if you held CEF in tax deferred account - like IRA.
For non-IRA account - if shares are sold - you would likely look for long term capital gain treatment - but because - CEF is equivalent to owning physical bullion - it is treated as collectible - and the tax rate will be up to 28%
On other hand - because it is a foreign fund - you should file the form 8621 to opt for CEF to be treated as PFIC - that would allow you to use a 15% long-term rate.
If you did not file the form - the gain will be taxed at 28%
In additional - there is a risk of $10,000 penalty for not filing the form 8621 - I can't recall the IRS used that for CEF - but I also see nothing that might stop them.
So this "blah, blah" might be very costly.
Tax Advisor
Taxes, Immigration, Labor Relations