Is Sandstorm a PFIC company?For all of you accountants out there, is Sandstorm Gold SNDXF a PFIC company? If so, What’s the best way to invest in it.
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Hi Jennifer, I saw your question via email too — sorry I hadn’t yet responded. I’m not an accountant and have not talked to my accountant about the potential PFIC issue. I do know that International Royalty Corp. did, at least for a time, consider itself a PFIC, I don’t know about Silver Wheaton, which would be the most direct comparison. I think SLW decided that they were not a PFIC in 2008, but haven’t seen any updated commentary from them.
There’s a pretty clear article here about the impact of PFIC for US investors, FYI: http://www.osler.com/NewsResources/Default.aspx?id=3389
I certainly can’t give accounting or tax feedback, but it strikes me that a primary issue is whether buying and selling gold through streaming contracts is “passive” like royalties are. Regardless, the upshot is that there are a few ways investors can file for/react to PFIC if they determine that they hold an investment of this type, so talk to your accountant. Sorry that I can’t provide guidance on this, I’m afraid I don’t know the issue well myself — it would be helpful if Watson et al provided more guidance on this, but most companies seem not to. I do wonder whether the warrants, as a derivative on the equity, might be one way to possibly not have to worry about the issue (since they basically trade at the money right now, with little to no premium) — but I don’t know if that’s true, just another consideration for you and your accountant.
What a head ache.. I had know idea. I guess I will attempt to put some of my shares in an IRA to dodge some of these problems. Who dreams this stuff up?