4
1

Client inherited gold Krugerrands and now is contemplating selling them. What is the proper tax treatment if he does?

(My initial take is that the coins are investment property, eligible for long-term capital gain or loss treatment. The basis would be the market value of the coins on the date of inheritance. Any gain would not be subject to he 28% rate for collectibles, as they are neither rare nor collector's proofs and don't command a price premium over the intrinsic value of the bullion.)

asked 05 Jun '10, 18:31

Tom's gravatar image

Tom
2.0k11227
accept rate: 8%


You are right - here is the cite of the IRC - from RIA

Code Sec. 408(m)(2)(F) . A “collectible” does not include:

(1) gold coins described in 31 USC 5112(a)(7)–(10); 25 (see below)

(2) silver coins described in 31 USC 5112(e);

(3) platinum coins described in 31 USC 5112(k);

(4) any coin issued under the laws of any state. The exception for state coins applies as long as the coins are held by a person independent of the IRA owner; or

(5) any gold, silver, platinum, or palladium bullion (other than bullion made into a coin that is considered a “collectible”), if the bullion is: (i) of a fineness equal to or exceeding the minimum fineness that a “contract market” (as defined in the Commodity Exchange Act, 7 USC §7) requires for metals which may be delivered in satisfaction of a regulated futures contract, and (ii) in the physical possession of a trustee that meets the requirements for trustees of IRAs (under Code Sec. 408(a))

25 Code Sec. 408(m)(3)(A)(i) .For purposes of this subsection , the term “collectible” shall not include—

(A) any coin which is—

(i)a gold coin described in paragraph (7) , (8) , (9) , or (10) of section 5112(a) of title 31, United States Code ,

(ii)a silver coin described in section 5112(e) of title 31, United States Code ,

(iii)a platinum coin described in section 5112(k) of title 31, United States Code , or

(iv)a coin issued under the laws of any State, or

(B)any gold, silver, platinum, or palladium bullion of a fineness equal to or exceeding the minimum fineness that a contract market (as described in section 7 of the Commodity Exchange Act, 7 U.S.C. 7 ) requires for metals which may be delivered in satisfaction of a regulated futures contract,

link

answered 08 Jun '10, 14:26

PStampley's gravatar image

PStampley
1.4k110
accept rate: 10%

That looked great to me -- but unfortunately, I think it's wrong. See my own answer below.

(10 Jun '10, 16:53) Tom

Does anyone have access to the USC cite below?

Code Sec. 408(m)(2)(F) . A “collectible” does not include:

(1) gold coins described in 31 USC 5112(a)(7)–(10);

(11 Jun '10, 15:07) PStampley

26 USC 408 is here: http://www.law.cornell.edu/uscode/html/uscode26/usc_sec_26_00000408----000-.html and 31 USC 5112 is here: http://www.law.cornell.edu/uscode/html/uscode31/usc_sec_31_00005112----000-.html

(28 Jun '10, 16:38) Tom

USC 408 discusses collectibles in re retirement accounts. 408(m)(3) excludes certain coins (which, if you go read 31 USC 5112(a), includes American Eagles, but not gold coins in general). USC 1(h) discusses collectibles re the 28% rate, and starts with the definition from 408(m) but excludes the exclusion, if you will, so even US gold coins are considered collectibles for the 28% rate.

(28 Jun '10, 16:45) Tom

Thanks for clarifying

(29 Jun '10, 15:51) PStampley

Upon more detailed investigation, my initial take appears to be wrong.

Under 1(h)(4):

(4) 28-percent rate gain
For purposes of this subsection, the term “28-percent rate gain” means the excess (if any) of—
(A) the sum of—
(i) collectibles gain; and
(ii) section 1202 gain, over
(B) the sum of—
(i) collectibles loss;
(ii) the net short-term capital loss; and
(iii) the amount of long-term capital loss carried under section 1212 (b)(1)(B) to the taxable year.

and 1(h)(5)(A):

(5) Collectibles gain and loss
For purposes of this subsection—
(A) In general
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.

and 408(m)(2):

(m) Investment in collectibles treated as distributions
(2) Collectible defined
For purposes of this subsection, the term “collectible” means—
(A) any work of art,
(B) any rug or antique,
(C) any metal or gem,
(D) any stamp or coin,
(E) any alcoholic beverage, or
(F) any other tangible personal property specified by the Secretary for purposes of this subsection.

The exclusions in 408(m)(3) specifically do not apply with regard to the 28% rate under 1(h)(5)(A).

link

answered 10 Jun '10, 18:56

Tom's gravatar image

Tom
2.0k11227
accept rate: 8%

Excellent question and point Tom!!! I agree they are investment property for LT Cap Gain....now collectible? You lost me there but great question for inquring minds :)

link

answered 05 Jun '10, 20:39

SandySea's gravatar image

SandySea
6.0k11131
accept rate: 7%

Your answer
toggle preview

Follow this question

By Email:

Once you sign in you will be able to subscribe for any updates here

By RSS:

Answers

Answers and Comments

Markdown Basics

  • *italic* or _italic_
  • **bold** or __bold__
  • link:[text](http://url.com/ "title")
  • image?![alt text](/path/img.jpg "title")
  • numbered list: 1. Foo 2. Bar
  • to add a line break simply add two spaces to where you would like the new line to be.
  • basic HTML tags are also supported

Tags:

×15
×9
×6
×1

Asked: 05 Jun '10, 18:31

Seen: 3,532 times

Last updated: 10 Jun '10, 18:56