FOR:

SUBMISSION TO THE PRESIDENT\'S ADVISORY PANEL ON

FEDERAL TAX REFORM

MARCH 17, 2005

FROM:

THE SILVER INSTITUTE

CATEGORY: TRADE ASSOCIATION

1200 G STREET NW SUITE 800

WASHINGTON DC 20005

202-835-0185

MICHAEL DIRIENZO

mdirienzo@silverinstitute.org

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March 17, 2005

Chairman Connie Mack

The President\'s Advisory Panel on Federal Tax Reform

1440 New York Avenue NW

Suite 2100

Washington, DC 20220

Dear Chairman Mack:

I am writing to request that the President's Advisory Panel on Tax
Reform recommend that investors in physical precious metal investment
products, including precious metal-based exchange traded funds, receive
the same capital gains tax rate of 15 percent as investments in equities
and mutual funds, that invest directly in precious metals.

Congress will soon be addressing this issue with the introduction of
legislation to allow physical precious metals investment products,
including gold, silver, palladium and platinum investment-grade bullion
coins (such as the American Eagle coins issued by the U.S. Mint) and
bars, eligible for the preferential lower capital gains rate.

Essentially, these bills would remove these investment products from the
collectible tax category, making them eligible for the 15-percent
capital gains treatment currently afforded to investments such as
equities and mutual funds. At present, precious metals bullion
investments products are taxed at the disadvantaged rate of 28 percent.

(continued)

Submitter: The Silver Institute

Michael DiRienzo

202-835-0185

Page 2

Chairman Connie Mack

March 17, 2005

The reason that precious metals bullion investments should be treated
like equities and mutual funds under the tax code is because they trade
like equities and mutual funds. Gold, silver, platinum and palladium are
mediums of exchange that trade in a liquid market, around the world, and
around the clock. Additionally, many financial advisors recommend that
investors' financial portfolios be diversified and include precious
metals along with stocks, bonds and cash. Diversification helps protect
portfolios against fluctuations in the value of any one-asset class.
Precious metals are historically ideal diversifiers, because the
economic forces that determine the prices of these assets are different
from, and in many cases opposed to, the forces that influence most
financial assets.

Congress has already recognized the investment nature of precious
metals, when it amended the tax code to allow Individual Retirement
Account (IRA) investors the opportunity to include physical precious
metals bullion investment products. The legislation we seek to enact
parallels similar language included in the Taxpayer Relief Act of 1997
(TRA), which created sweeping changes for Americans who invest in IRAs.
Section 304 of the TRA broadened the precious metals options for IRA
investors. Prior to the TRA, while IRA investors could have invested in
a wide variety of precious metals mining stock and mutual funds, they
had been restricted in their choice of physical precious metals
investment. Our legislation conforms to the spirit of the IRA provision
in the TRA by providing preferential capital gains tax treatment for
physical precious metals bullion investments.

Submitter: The Silver Institute

Michael DiRienzo

202-835-0185

Page 3

Chairman Connie Mack

March 17, 2005

Moreover, the Joint Committee on Taxation has scored this measure at
just \$52 million in total over a ten-year time frame. This extremely
low score makes change to the tax code even more attractive from a
policy standpoint.

Investors are increasingly moving toward precious metals as an avenue to
diversify their portfolios. Uncertainty in the equities markets coupled
with the recent corporate scandals have led to a renewed and robust
interest in hard assets, such as precious metals.

We look forward to working with you as the President\'s Advisory Panel
on Federal Tax Reform moves forward on making recommendations to the
President on tax reform and simplification.

Sincerely,

![](media/image3.jpeg){width="1.929861111111111in"
height="0.6659722222222222in"}

Michael DiRienzo

Executive Director