Taxes on gold coins

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Topic Author
oldfarts
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Joined: Tue Jan 24, 2023 4:39 pm

Taxes on gold coins

Post by oldfarts »

I received some gold coins from an inheritance. Since I didn't purchase them is my profit the total value of the coin? If so is that subject to 'collectable' capital gain tax of 28%? Thanks.
Silk McCue
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Re: Taxes on gold coins

Post by Silk McCue »

Welcome to the forum!

Sorry for your loss.

The cost basis for tax purposes of the gold coins is their value on the date of the death of the owner. When you sell the gold taxes will only be due on any increase between the sale price and their valuation on the date of death.

Cheers
Topic Author
oldfarts
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Re: Taxes on gold coins

Post by oldfarts »

Thanks. Now I just need to find out what roughly was paid for the coins. This helps a lot.
secondcor521
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Re: Taxes on gold coins

Post by secondcor521 »

oldfarts wrote: Tue Jan 24, 2023 4:45 pm I received some gold coins from an inheritance. Since I didn't purchase them is my profit the total value of the coin? If so is that subject to 'collectable' capital gain tax of 28%? Thanks.
Silk answered the first part - you get a step up in basis to the value on the date of death, so you only owe capital gains taxes on the difference between that basis and your sales price. All inherited assets get long term tax treatment also, regardless of how long you or the decedent owned the coins.

Regarding your second question, the gold coins are a collectible (and taxed as such) unless they meet the requirements here: https://www.law.cornell.edu/uscode/text/31/5112#a. The gold coin specifications in that section of the law appear to apply to American Eagle gold coins but probably not others.

(You can get to that portion of the tax code by starting with a google of "collectible site:irs.gov" and going from there. Or at https://www.irs.gov/retirement-plans/in ... :text=Gold)
secondcor521
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Re: Taxes on gold coins

Post by secondcor521 »

oldfarts wrote: Tue Jan 24, 2023 8:03 pm Thanks. Now I just need to find out what roughly was paid for the coins. This helps a lot.
It doesn't matter what was paid for them any more. It matters what their value was as of the date of death of the decedent.
Topic Author
oldfarts
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Re: Taxes on gold coins

Post by oldfarts »

Great points. I'll read up on your suggested links. Thanks.
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Kenkat
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Re: Taxes on gold coins

Post by Kenkat »

secondcor521 wrote: Tue Jan 24, 2023 8:04 pm Regarding your second question, the gold coins are a collectible (and taxed as such) unless they meet the requirements here: https://www.law.cornell.edu/uscode/text/31/5112#a. The gold coin specifications in that section of the law appear to apply to American Eagle gold coins but probably not others.
I am not aware of any exemptions for any type of gold coins that would allow them not to be taxed as collectibles. Whether they are considered numismatic items or bullion coins, they are still taxed as collectibles as far as I have ever heard. For example, American Gold Eagles are considered collectible coins by the IRS.
secondcor521
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Re: Taxes on gold coins

Post by secondcor521 »

Kenkat wrote: Tue Jan 24, 2023 9:01 pm
secondcor521 wrote: Tue Jan 24, 2023 8:04 pm Regarding your second question, the gold coins are a collectible (and taxed as such) unless they meet the requirements here: https://www.law.cornell.edu/uscode/text/31/5112#a. The gold coin specifications in that section of the law appear to apply to American Eagle gold coins but probably not others.
I am not aware of any exemptions for any type of gold coins that would allow them not to be taxed as collectibles. Whether they are considered numismatic items or bullion coins, they are still taxed as collectibles as far as I have ever heard. For example, American Gold Eagles are considered collectible coins by the IRS.
From the IRS link in my earlier post:

"Gold, silver, platinum, palladium, and coins
The following coins and metals are not included in the definition of “collectible” under IRC Section 408(m):
Certain gold, silver, or platinum coins described in 31 USC Section 5112. See IRC Section 408(m)(3)(A) for the full definition."

-- https://www.irs.gov/retirement-plans/in ... :text=Gold

If you look at 31 USC 5112(a)(7), the definition there seems to include American Gold Eagles based on their diameter, weight, and gold content. ((a)(11) seems to refer to $50 gold Buffalo coins.)
fourwheelcycle
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Re: Taxes on gold coins

Post by fourwheelcycle »

I used to collect coins when I was in grade school, thru junior high. Back then, I used the Red and Blue books as a guide for buy and sell prices https://americancoinstash.com/2021/01/0 ... ing-books/. The books are still around, but I have not bought them since I was young.

As an adult, during the 1980s and early 1990s, I bought a few gold coins, some original "old" coins and some contemporary bullion coins. I have kept a record of what I paid, and I keep track of their value by referencing this web site https://www.usacoinbook.com. Depending on how many coins you inherited, you could learn to grade them and estimate their current value by going to this web site, as a start. Their value is what a dealer might give you for them or what you might be able to sell them for on eBay, not necessarily what they might cost if you went to a retail coin shop.

Of course, if you are going to sell them all at once, the offers you get from a few different large coin dealers would indicate their fair market value as a "lot". The same dealers might be willing to give you a number for what they would have paid for the same lot a year ago, or whenever the person you inherited them from died.
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Kenkat
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Re: Taxes on gold coins

Post by Kenkat »

secondcor521 wrote: Tue Jan 24, 2023 9:32 pm
Kenkat wrote: Tue Jan 24, 2023 9:01 pm
secondcor521 wrote: Tue Jan 24, 2023 8:04 pm Regarding your second question, the gold coins are a collectible (and taxed as such) unless they meet the requirements here: https://www.law.cornell.edu/uscode/text/31/5112#a. The gold coin specifications in that section of the law appear to apply to American Eagle gold coins but probably not others.
I am not aware of any exemptions for any type of gold coins that would allow them not to be taxed as collectibles. Whether they are considered numismatic items or bullion coins, they are still taxed as collectibles as far as I have ever heard. For example, American Gold Eagles are considered collectible coins by the IRS.
From the IRS link in my earlier post:

"Gold, silver, platinum, palladium, and coins
The following coins and metals are not included in the definition of “collectible” under IRC Section 408(m):
Certain gold, silver, or platinum coins described in 31 USC Section 5112. See IRC Section 408(m)(3)(A) for the full definition."

-- https://www.irs.gov/retirement-plans/in ... :text=Gold

If you look at 31 USC 5112(a)(7), the definition there seems to include American Gold Eagles based on their diameter, weight, and gold content. ((a)(11) seems to refer to $50 gold Buffalo coins.)
I believe that is targeted towards allowing an exception as “collectibles” for the purposes of holding these coins in an IRA or retirement plan - i.e., certain gold coins can be held in an IRA as an exception to the normal handling:

The acquisition by an individually-directed account under a qualified plan of a “collectible” is treated as an immediate distribution from such account in an amount equal to the cost to the plan of such collectible. See IRC Section 408(m). Exceptions apply for specific collectibles, as discussed below.
.
and
.
The following coins and metals are not included in the definition of “collectible” under IRC Section 408(m):

Certain gold, silver, or platinum coins described in 31 USC Section 5112. See IRC Section 408(m)(3)(A) for the full definition.
Any coin issued under the laws of any state.
Any gold, silver, platinum, or palladium bullion of a certain fineness if a bank or approved non-bank trustee keeps physical possession of it. See IRC Section 408(m)(3).


https://www.irs.gov/retirement-plans/in ... n-accounts

Outside of an IRA or other retirement account, the tax treatment is the same for gold coins, regardless of whether they are considered a collectible or bullion coins:

Physical holdings in precious metals such as gold, silver, platinum, palladium, and titanium are considered by the Internal Revenue Service (IRS) to be capital assets specifically classified as collectibles. Holdings in these metals, regardless of their form—such as bullion coins, bullion bars, rare coinage, or ingots—are subject to capital gains tax. The capital gains tax is only owed after the sale of such holdings and if the holdings were held for more than one year.

https://www.investopedia.com/articles/p ... tments.asp

It’s confusing because the wording indicates certain gold coins are not collectibles but it doesn’t actually really matter outside of an IRA or retirement account.
secondcor521
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Re: Taxes on gold coins

Post by secondcor521 »

Kenkat wrote: Wed Jan 25, 2023 10:14 am [snipped for brevity]
Ah, you are correct. Thanks for the clarification and amplification.

I think I found the correct citation in 26 USC 1(h)(5)(A) where it's explaining about the 28% capital gains tax rate:

"The terms “collectibles gain” and “collectibles loss” mean gain or loss (respectively) from the sale or exchange of a collectible (as defined in section 408(m) without regard to paragraph (3) thereof) which is a capital asset held for more than 1 year but only to the extent such gain is taken into account in computing gross income and such loss is taken into account in computing taxable income."

Emphasis added.
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