CASH FOR CLUNKERS [FLORIDA]

If you are fortunate (unfortunate?) enough to qualify for the cash for clunkers program, the federal government will provide a $3,500 or $4,500 voucher toward the purchase or lease of a new, more fuel efficient vehicle when the purchaser or lessee surrenders an eligible trade-in to a participating dealer.

In a break to participants, the Florida Department of Revenue has advised car dealers that they should consider the voucher itself as a trade-in for purposes of Florida sales tax purposes. This means that the amount of the voucher will be taken off the sales price in computing sales tax due on the new vehicle purchase.

Tax Information Publication No. 09A01-11, July 16, 2009

IRS CONFIRMS PRECIOUS METAL ETF'S CAN GENERATE COLLECTIBLES GAINS

Many investors purchase gold, silver, and other precious metals through exchange traded funds (ETFs). Since shares in ETFs are usually traded through stock exchanges, the question has arisen whether any long term gains on sale of such ETF metal shares will be subject to the standard 15% maximum income tax rate long term capital gains, or the 28% "collectibles" maximum tax rate that would otherwise apply to direct gains in such metals.

The IRS has recently released a 2008 Chief Counsel Memorandum that confirms that as far as it is concerned, if the ETF is structured as a "trust" for income tax purposes and the fund purchases physical metal, then the gain will be collectibles gains, and thus long term gains will be subject to the 28% maximum rate.

Interestingly, in earlier private letter rulings (PLRs 200732026 & 200732027), the IRS adopted a somewhat contrary opinion when it ruled that the acquisition of shares of a publicly traded investment trust invested in gold or silver by either an IRA or an individually-directed account under a qualified retirement plan would not be considered the prohibited acquisition of a collectible under Code Section 408(m)(1).

Office of Chief Counsel Memorandum, CC:ITA:B01:LAAyres, May 2, 2008

APPLICABLE FEDERAL RATES – AUGUST 2009