Is There a Tax Efficient Way to Sell Gold & Silver Coins?

gold coins 1031 exchange

Many people may be holding gold and silver coins that have or will (hopefully) appreciate in value. These folks may be wondering how to lessen the amount of taxes that they will have to pay when they convert their gold and silver coins for a profit or gain.

Deferring Taxes on the Sale of Coins

Internal Revenue Code Section 1031 allows for the tax deferred exchange of certain types of property. However, Section 1031(a)(2) excludes many other types of property, specifically:

  • “Notes” 
  • “Securities”
  • “Choses in Action”  

Circulating currency falls within the scope of these excluded property types.

Currency Defined

Currency is defined by Blacks Law Dictionary as “coined money and such banknotes or other paper money as are authorized by law and do in fact circulate from hand to hand as the medium of exchange.”

The Treasury Regulations help people understand how the Internal Revenue Code will be applied by the IRS.  Notably on point, Treasury Regulation §1.1031(a)-1(2) indicates that an exchange will not be like-kind and will not be within the provisions of Section 1031 if “as part of the consideration, the taxpayer receives money or property which does not meet the requirements of 1031(a).”

IRS Revenue Ruling

In 1976, there was a Revenue Ruling (Rev. Rule 76-214; 1976-1 C.B. 218) where a taxpayer was allowed to exchange Mexican 50-peso gold coins for Austrian 100-corona under Section 1031. This was essentially a like-kind exchange of “gold bullion-type coins” for “gold bullion-type coins” that were of the same nature and character.  It was not really an exchange of currency, but an exchange of the underlying gold material that the coins were made of.  The investment exchanged was gold, not currency.  

In Revenue Ruling 76-214, the coins are clearly distinguished as not being “circulating mediums of exchange”.  The Revenue Ruling stated that neither of the two types of gold coins were “currency, or money as such term is used in Section 1031 of the Code, since money in its usual and ordinary acceptation is synonymous with currency.”

Check out our website for information on Gold Numismatic Coins & Silver Numismatic Coins.

  • 1031 Hotline: If you have questions about 1031 exchanges of coins, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

 

© 2016 Copyright Jeffrey R. Peterson All Rights Reserved