Wednesday, October 27, 2010
Most tourists who engage in gold panning find gold which is worth less than their price of admission to the gold mine. From a tax standpoint, they have nondeductible, personal losses. Those precious few who find gold which is worth more than their price of admission should not have taxable income unless or until they sell the gold to a third party. Due to the valuation and allocation difficulties inherent in measuring basis and amount realized, there should be no realization event when the gold is panned. Alternatively, the gold panning activity can be viewed as producing tax free, imputed income, at least until the later sale event.