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
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,
answered 08 Jun '10, 14:26
Upon more detailed investigation, my initial take appears to be wrong.
The exclusions in 408(m)(3) specifically do not apply with regard to the 28% rate under 1(h)(5)(A).
answered 10 Jun '10, 18:56
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 :)
answered 05 Jun '10, 20:39