Selling Gold Coins
 by Alan L. Olsen, CPA, MBA (tax)
Managing Partner
Greenstein Rogoff Olsen & Co. LLP
Q: My mother-in-law wants to convert some gold coins, specifically
American Gold Eagles and Canadian Gold Maple Leafs, into CDs and/or money market
funds. How does one convert gold coins into cash in order to do this? What are
the IRS reporting requirements?
A: In an unsettled economy, investing in gold coins
becomes more popular. Given that numismatic coins are often more valuable than
bullion alone, this heightened interest is no surprise. The American Eagle, for
example, is the most common investment gold coin in the United States. Buyers
and sellers like it because they know exactly what is at stake: One unique
attribute of this coin, which uses the 22 karat standard established for gold
circulating coinage more than 350 years ago, is that its weight and purity are
guaranteed by the U.S. Government.
From
high-end jewelers to pawnshops, you will have little trouble finding businesses
interested in selling or buying your gold coins. However, to maximize your
profit – and give you some peace of mind – you need to do a little research.
Here are a few tips:
- Locate a reputable dealer. In addition to the Better Business Bureau and other
resources, the U.S. Mint’s own website (www.usmint.gov)
lists dealers by state.
- Call
around, as prices to buy and sell can vary greatly. In addition, prices change
continually throughout the day, so try to get a time commitment for how long a
quote will be valid.
- Be very
wary of TV, Internet and “get cash fast” ads.
As for taxes, Uncle Sam takes a bite out of almost every asset sold
and coins are no exception. In fact, collectibles are subject to one of the
highest rates of federal taxation on investment property. Capital gain from a
collectible sale is taxed at 28 percent. This is significantly higher than for
stocks, securities and many other investments, which enjoy a 15 percent capital
gains tax rate (5 percent for taxpayers in the 10 percent to 15 percent tax
brackets).
There are two other tax issues to consider. First, relates to the valuation of
gold coins. When coins have numismatic worth exceeding their face denomination,
the amount realized is the numismatic value of the coins, not the face
value. Second, if you want to invest in the price of gold rather than the coins’
collectability, consider investing in gold strictly as a precious metal, such as
through gold-mining stocks. That interest, and the gain realized by selling it,
is entitled to full capital gain treatment.
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