Question about estate planning- Coins verses Bullion

jkal

I posted this on the coin collector board and thought that it might be more appropriate for this board to I am going to ask it here as well.


I was given a tax law that talks about what can be stepped up in value when it comes to coin collections. For example a $20 gold coin purchased in 1970 for $35 dollars by your father will be stepped up in value when you inherit them. Your cost basis will be what they were worth when they became yours.
I am attaching a copy of an IRS rule that was given to me by an estate attorney. I think that it says gold and silver bullion does not qualify as a step up in value. Does that include 100 ounce silver bullion bars, or only coins made in $50, $25 etc bullion.
My reason for asking is why would a 1964 half dollar be able to be stepped up in value but not a 1 ounce silver round. Am I reading this wrong or has the question as to which is a better investment between buying 90% junk silver verses silver rounds or bars. If one can be given to your family at a new cost basis, and the other one cannot be stepped up in value.

Can someone clarify this for me- I am attaching the rule that was sent to me-

Exception for certain coins and bullion.-- 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 (see below),
(ii) a silver coin described in section 5112(e) of title 31, United States Code (see below),
(iii) a platinum coin described in section 5112(k) of title 31, United States Code (see below), 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,
if such bullion is in the physical possession of a trustee described under subsection (a) of this section.

Here are the sections that are made reference to above:

Section 5112(a) of title 31 of the United States Code states that the Secretary of the Treasury may mint and issue only the following coins:
(7) A fifty dollar gold coin that is 32.7 millimeters in diameter, weighs 33.931 grams, and contains one troy ounce of fine gold.
(8) A twenty-five dollar gold coin that is 27.0 millimeters in diameter, weighs 16.966 grams, and contains one-half troy ounce of fine gold.
(9) A ten dollar gold coin that is 22.0 millimeters in diameter, weighs 8.483 grams, and contains one-fourth troy ounce of fine gold.
(10) A five dollar gold coin that is 16.5 millimeters in diameter, weighs 3.393 grams, and contains one-tenth troy ounce of fine gold.

Section 5112(e) of title 31 states that the Secretary shall mint and issue, in quantities sufficient to meet public demand, coins which
(a) are 40.6 millimeters in diameter and weigh 31.103 grams;
(b) contain .999 fine silver;
(c) have a design--
(d) symbolic of Liberty on the obverse side; and
(e) of an eagle on the reverse side;
(f) have inscriptions of the year of minting or issuance, and the words “Liberty”, “In God We Trust”, “United States of America”, “1 Oz. Fine Silver”, “E Pluribus Unum”, and “One Dollar”; and
(g) have reeded edges.

Section 5112(K) of title 31 states the Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary's discretion, may prescribe from time to time.

1jester

I wonder how the IRS rules stack up against the US Constitution?

That said, one of the beauties of real money (hard money, aka gold and silver) is that it is is private and fairly easily concealed, not to mention no-one's liability. In a word, real money. Good luck!

roadrunner

Aren't those references more related to coins allowed in IRA's? They go to great lengths to describe what coins are suitable for an IRA (ie mint state and proof AGE's, mint state buffs, etc.). They specifically don't want collectible coins in an IRA. But then to muddy the waters they treat both bullion and collectable coins as if they were all "collectibles" (ie 28% cap gains rate). Even if you received an informal ruling via an accountant, broker, or an IRS representative on what items could not be stepped up, who's to say that it can't be reinterpreted just the opposite down the road? I would think that non-bullion coins getting less than 50% of their value from their intrinsic worth should always remain "steppable." That's using the most restrictive definition of non-bullion coin to date which is from Homeland Security's money laundering regulations (PA2). 90% silver coin trades within a couple percent of it's spot value so hard not to think of that as just bullion. Now if you went to XF walkers or something like that, then maybe you can state a case. But even so, down the road, I'd expect XF walkers to fall prey to the great silver melt machine. If that $20 Lib purchased back in 1970 were just a polished jewelry piece one could make the case that it is just bullion.

There is such a mish-mash of "rules" involved here that it's more like a moving target. And down the road I think things will morph towards the more strict interpretation, such as what is currently found in HS Patriot Act 2.

roadrunner

jkal

I agree and always appreciate your input. They would be crazy to try to make a case of bullion verses 90%.
Thank you for taking the time to answer this question.