Bullion vs. Numismatic Coin

wondercoin

If a US coin has an ounce of gold in it (let's value gold here at $1,600/oz. for these purposes) and has a market value of $2,200, is this coin considered "bullion" by the U.S. govt.?

Can someone refresh my memory on this please. I seem to recall that there were some regulations surrounding the Patriot Act that spoke to this very issue. I just could not find them tonight when I did a real fast google search.

What is the official rule on this?

Thanks.

Wondercoin

edited to add (for clarification) :

Let me be a little clearer to try to get the answer I am looking for.

A customer asked me late last night which US precious metal coins would not be subject to confiscation by the govt. if they, once again, decided to require US citizens to turn in their gold. Now, mind you, this is not a concern I personally have. But, I am surprised just how many gold buyers have this concern in the back of their mind. In working through that question, one of the related issues that came up was pure "bullion" vs. collector coins. And, the customer asked me a "simple" question how one defines bullion. As I mentioned in the initial post, I seemed to recall that there may have been some regulation surrounding the Patriot Act that may have given a definition of bullion? If there was, I wanted to read it again as I thought it would be helpful and, thank you s4ny, for that New York definition of bullion ... I will research that further. That was the gist of my customer's (sub)question. Can anyone confirm if there was a Federal definition of "bullion" (possibly in connection with the Patriot Act)?

Wondercoin

Steve27

I'm not sure what you're looking for, but here is a nice summary of the reporting requirements under the Patriot Act LINK.


I don't believe market value vice bullion value matters to the Feds, and the only issue I've heard of, relates to face value vice bullion value when executing a transaction (there have been cases where an employer paid his workers in US gold $50 bullion coins and claimed the face value vice bullion value when reporting employees earnings to the Feds).

s4ny

NY State has a set of rules to determine sales tax on coins. If the sales price
is above a stated percentage of the metal value sales tax applies.

140% with respect to silver coins;
120% with respect to gold coins weighing 1/4 ounce or less;
115% with respect to all other coins;

djm

<< <i>I've heard of, relates to face value vice bullion value when executing a transaction (there have been cases where an employer paid his workers in US gold $50 bullion coins and claimed the face value vice bullion value when reporting employees earnings to the Feds).

>>



I rember this case the employer was busted for faliure to pay minmimum wage to the employee. As the rest of what he did was legal.

OPA

<< <i>I'm not sure what you're looking for, but here is a nice summary of the reporting requirements under the Patriot Act LINK.


I don't believe market value vice bullion value matters to the Feds, and the only issue I've heard of, relates to face value vice bullion value when executing a transaction (there have been cases where an employer paid his workers in US gold $50 bullion coins and claimed the face value vice bullion value when reporting employees earnings to the Feds). >>



Very well written summary. Thank you for the link.

JohnHarper

I recall dealing with the issue several years ago. If a coin sold for less than double its melt value, it was considered bullion. If more than double it was a "rare" coin. Let's say we had a coin listed for sale at $1000 and the melt value was $505. That was good because it was a rare coin and we did not have to report it. If the gold value dropped to $495, that was bad because we had to report it. Then there was some dollar value for annual sales to consider. If we sold more than some amount of bullion annually, we were a bullion dealer and had to report. Again, as I recall, we never sold enough bullion coins to hit that limit but it was a pain to keep track of the "bullion" sales.

The dealer also needed a written policy and training for his employees on how to keep records and file reports. Look it up in your procedure manual. Don't have one? The government can charge you for that.

CoinZip

Its not that simple wondercoin....


US Gold Eagle is not reportable but similar bullion coins like the Canadian Maple Leaf or the South African Krugerrand are, according the the article linked above.

derryb

FWIW the US Mint refers to all of its American Eagle and Gold buffalo coins as bullion coins.

Further info on reporting requirements is found here.

wondercoin

Thanks for the replies thus far.

Let me be a little clearer to try to get the answer I am looking for.

A customer asked me late last night which US precious metal coins would not be subject to confiscation by the govt. if they, once again, decided to require US citizens to turn in their gold. Now, mind you, this is not a concern I personally have. But, I am surprised just how many gold buyers have this concern in the back of their mind. In working through that question, one of the related issues that came up was pure "bullion" vs. collector coins. And, the customer asked me a "simple" question how one defines bullion. As I mentioned in the initial post, I seemed to recall that there may have been some regulation surrounding the Patriot Act that may have given a definition of bullion? If there was, I wanted to read it again as I thought it would be helpful and, thank you s4ny, for that New York definition of bullion ... I will research that further. That was the gist of my customer's (sub)question. Can anyone confirm if there was a Federal definition of "bullion" (possibly in connection with the Patriot Act)?

Wondercoin

Timbuk3

Thanks for the information !!!

AMRC

The government, should in the unlikely event want to confiscate gold, can at it's discretion decide what it would want to confiscate. There is no way of answering this in advance, and your answer should be, frankly, that there is no answer to this. Now as to the question if they ever would? The last time this happened was because the government wanted to sever the tie between money supply and gold bullion. Today our money is not tied to gold, and so I am not sure under what pretense it would make sense for "them" (us) to do so.

wondercoin

"Confiscation issue just won't happen as most of the experts have said."

Again, as I mentioned, I am personally in that camp. And, I also believe from my cursory research that the issue of "bullion" vs. "numismatic coin" is not simply determined by a straight formula. That said, I wanted to know what the state or federal govt thought of "bullion" and if they had their own formulas already in place via regulations or statutes.

Thanks for the help and I will also continue to research this interesting question.

Wondercoin

Steve27

A look back at the past:

"Section 2. All persons are hereby required to deliver on or before May 1, 1933, to a Federal Reserve bank or a branch or agency thereof or to any member bank of the Federal Reserve System all gold coin, gold bullion, and gold certificates now owned by them or coming into their ownership on or before April 28, 1933, except the following:

(a) Such amount of gold as may be required for legitimate and customary use in industry, profession or art within a reasonable time, including gold prior to refining and stocks of gold in reasonable amounts for the usual trade requirements of owners mining and refining such gold.

(b) Gold coin and gold certificates in an amount not exceeding in the aggregate $100.00 belonging to any one person; and gold coins having recognized special value to collectors of rare and unusual coins.

(c) Gold coin and bullion earmarked or held in trust for a recognized foreign government or foreign central bank or the Bank for International Settlements.

(d) Gold coin and bullion licensed for the other proper transactions (not involving hoarding) including gold coin and gold bullion imported for the re-export or held pending action on applications for export license."


If they follow the 1933 act, then all that's necessary to stop confiscation, is to show it has "...recognized special value to collectors of rare and unusual coins." I don't believe the Patriot Act covered any distinction between bullion and collector gold, and perhaps it was someone's interpretation you are recalling.

wondercoin

Thanks Steve! Interestingly, Oreville told me that he recalled that the Patriot Act may have spoken to the definition of "bullion", but he was knee deep in some tax returns as this is his busiest season. He told me he had discussed the issue with Roadrunner in the past so I just asked Roadrunner if he might chime in on this. Stay tuned.

Wondercoin

oreville

<< <i>but he was knee deep in some tax returns as this is his busiest season. >>



More like waist deep!

OPA

I'm not sure if this is still applicable...it was in 2010

"Tax obligations are the same for both numismatic and bullion coins. Gains on coins held longer than one year are taxed at the collectibles rate, which is 28%. Short-term gains are taxed as ordinary income."

MsMorrisine

well, I'm interested in that Patriot Act. I note HRH says pick up classic gold. I wonder what a desperate government would do if they really thought they had power to seize gold.

wondercoin

OPA .. Thanks. But, my question has nothing to do with taxes, reporting, etc. (at least to my customer asking the question). My question ties into how "bullion" is defined as a side bar to the discussion of which coins "MIGHT" be subject in the future to confiscation. And, more importantly, which coins my customer might elect to buy, because he personally believes his chance of keeping them are much stronger.

And, again, for the 3rd time, I personally do not worry about this issue at all. Maybe I should, but I don't.

That said ... how is "bullion" defined? It appears I have a definition that the State of NY uses (thanks again s4ny).

Thanks.

Wondercoin

L1ncolnF4n

Just because they say to turn it in doesn't mean much...the overwhelming cost associated with forceful seizure, let alone the public outcry and likely revolt that would ensue, virtually eliminates all possibility of this ever happening again.

MsMorrisine

well, even non-bullion may not be safe.

Hopefully they'd take just AGE and Gold Buffs, and even leave the commemorative gold alone.

but, one can suppose a lot, including a total confiscation of coins, bars, rounds.

I do re-iterate that "all the gold in the world" argument. Supposedly, all the gold in the world could not cover the oustanding rags the Fed Res. has. If they wanted to back with gold, they'd have to create an artifical price increase in gold. If they actually created an artifical price, they could stick with the gold they currently have in deep storage and not have to seize anything.

derryb

Steve's review of prior gold confiscation requirements is all one can really go on considering any future gold confiscation requirements. However, as Armen pointed out there is no gold standard as there was at that time, and therefore no need to replenish the national treasury's gold reserves. Any good guesses at future possible gold confiscation requirements will depend on why it is important that gold be confiscated. I advise anyone fearing future gold confiscation to buy silver (or gold jewelry if they gotta have gold).

"Reportable" and ""non-reportable" bullion are terms created by gold marketers trying to push a particular gold product on the customer.

The IRS has purposely remained vague on the bullion definition issue, and as OPA pointed out there really is no difference when it comes to reporting gains on income tax returns.

Fearing the government will sometime in the future make you sell them an asset at a price determined by them is reason enough not to own the asset. In the event of any future forced sale of gold by the public to the government it will more than likely not be dependent on an item's classification as bullion or not bullion. If Washington makes a move for the gold it will be to get it all, with very few, if any, exceptions. In other words, IMO the term bullion will be irrelevent.

MsMorrisine

<< <i>to buy silver (or gold jewelry if they gotta have gold). >>




scrap jewelry bought around melt.

derryb

<< <i>OPA .. Thanks. But, my question has nothing to do with taxes, reporting, etc. (at least to my customer asking the question). My question ties into how "bullion" is defined as a side bar to the discussion of which coins "MIGHT" be subject in the future to confiscation. And, more importantly, which coins my customer might elect to buy, because he personally believes his chance of keeping them are much stronger.

And, again, for the 3rd time, I personally do not worry about this issue at all. Maybe I should, but I don't.

That said ... how is "bullion" defined? It appears I have a definition that the State of NY uses (thanks again s4ny).

Thanks.

Wondercoin >>


It will boil down to which coins he can best bulid a numismatic case for. Will be hard to declare American Eagles as non-bullion when the US Mint sells them as bullion. This is of course assuming there would even be an exemption for numismatic coins. I would argue that if they go for the gold they will not attempt to appease the collector community as they earlier did.

OnlyGoldIsMoney

<< <i>Just because they say to turn it in doesn't mean much...the overwhelming cost associated with forceful seizure, let alone the public outcry and likely revolt that would ensue, virtually eliminates all possibility of this ever happening again. >>



I'll add my 2 cents to expand upon what you said.

In 1933 gold coinage was demonitized but not confiscated. Forceful seizure did not occur. The personal exemption of $100 face per person plus the numismatic loophole meant that anyone who wanted to retain gold coins could do so with little fuss. The rub was that during the Depression most people did not have extra cash to convert into gold coins.

roadrunner

There are multiple levels of definitions at play here starting with the 1934 Gold Reserve Act all the way up to Patriot Act 2.

To simply answer Wondercoin's question (JohnHarper already did) PA2 defines bullion as a coin (or any jewelry, gem, etc.) that gets at least 50% of its value from the intrinsic item. For gold coins the answer is 50% or 2X. An MS65 Saint currently worth $2200 is "bullion" per PA2. However, it's not bullion per IRS tax reporting. Then agains since rare coins and bullion get the same tax treatment, it doesn't matter. One of my coin dealer friends uses a 15% premium to distinguish between Bullion and rare coins for IRS purposes. While the IRS has probably never formally defined bullion, the 15% guideline works for his CPA, and many others.

Even a MS66 generic saint would be considered bullion today per PA2. But a CAC MS66 would exceed the 2X level, making it non-bullion, non-reportable to HS. I'm assuming that what you pay today for a coin determines its bullion status months or years down the road. But then again, the price of bullion constantly changes and who can say how HS or IRS might say that your MS66 CAC saint (bought at $1580/oz gold for $3800) is bullion today.....but, because the price moved up from $1580/oz to $2,000/oz it's now bullion when you go to sell it. Or, maybe it will be "confiscated" as bullion since it no longer meets the 2X rule. Expect the most onerous applications of these "rules" when the tough times eventually come.

PA2 is a money laundering act. At least that's what the govt has said it's all about. But I have no doubt that down the road when the push comes to shove, the PA definition is going to be put into effect in our markets for everyday use. Right now it's strictly for money laundering reporting and tracking purposes applicable to larger dealers, nothing else. One only has to be worried about PA2 if they do $50,000 per year in sales AND purchases. It's aimed at the dealers. But I'd think that investors buying and selling $50K in reportable gold coins each year might fall under the reporting, tracking and training per PA guidelines. Consult your CPA. As I recall, failure to comply was punishable for up to 5 or 10 yrs in prison and a $250K fine. I'm sure there are plenty of ebay bullion sellers who are not adhering to PA rules. Most of them probably aren't laundering money either. By the strict letter of the law with PA2, if you don't buy AND sell $50K in gold "bullion" items per year, the bill doesn't apply to you and you don't have to report or track. Their definition of bullion is only there to determine if you reach the reportable limit of $50K in annual transactions. The hard part is figuring out if this applies to non-dealers, transactions by check (ie non-cash), etc. I've read the rules more than once and they weren't very clear at all. Interpretations or common sense may not apply when it comes to reading written rules.

The confiscation "rules" changed several times from 1934 to 1974. Obviously, not all gold coins were confiscated from 1934-1974 because collectors like Pittman, Eliasberg and others were assembling gold dated sets. And many of those better dates brought very small premiums at the time to the price of gold ($35/oz). One could have ammassed a pile of $20 Libs of all diff dates but paid little more than bullion. By the early 1960's the rules were relaxed that allowed pre-1933 gold coins (even most foreign ones) to be called collector coin and therefore exempt from confiscation (ie old British sovereigns, etc.). To minimize the chances of confiscation of gold coins should that ever come about again I'd consider the following:

1. Build a collection of common and semi-common gold coins. A pile of twenty 1924 saints is not a collection. But one of each date (less keys) from 1907 to 1928 is a "collection."

2. Certainly exceed the 15% premium that the IRS currently interprets. That's not very hard since most circ XF gold is around +10%. But you'd have to jump to a MS64 Saint today to get a +17% to spot premium. Better yet, is to follow the PA2 guidance and find gold coins going for 2X spot. That would be CAC MS66 Saints for example or maybe MS64 $10 Indians/Libs...or maybe a scarce CC Type 3 XF/AU $20 Lib. I think one of the reasons for the popularity of CAC MS66 Saints is not only are the coins very choice for the grade, but that they currently exceed the 2X rule of PA2. The obvious risk with a MS66 CAC Saint is that if gold were to go to say $3500/oz, your coin wouldn't be worth much more than $4,000 at that point. You'd have been better off just buying a pair of AU Saints for your money. If the MS66 CAC saints or other similar coins prevent the confiscation of those, then those kinds of coins will be the only gold coins still running around in the free market. Everything else will move underground or overseas. I'll leave it up to each person to decide how realistic any of these scenarios are to them. More likely than confiscation is just the heaping on of windfall profit taxes to gold coin owners. In 1934 gold was money and FDR had to increase the money supply. He couldn't print more money until he devalued gold. Hence the need to call it all in. This time around they can just print to their heart's content. The general public will blame gold coin hoarders for all their ills and unanimously approve the addition of heavy taxes on gold coins to punish the gold bugs who ruined their economy and stole their jobs. VAT coming to this sector soon as well.

If the govt really wants your gold it won't matter what the IRS or PA2 says. They'll just come and get them under an economic emergency executive order. But I still think the average Joe can make a case for keeping their MS66 Saints. It's not like there are that many of them around to make a difference. If they come for those, then they'll come for your MS63 and MS64 Morgans next, and your Platinum and Palladium coins as well. Best you can do is to put the odds in your favor and then sit back and watch. If it were me I'd probably go for the MS64 Saints and MS63 $20 Libs of different dates. Both of these series have been promoted in these grades in the past. They are quality coins with a nice look. Your downside is losing the 15-20% premium to spot that they currently cost (along with the price of gold should that tank). Having them PCGS or NGC graded would help add to the "proof" that this is a collection of quality, hand-selected coins. Keep all receipts as well as price of bullion at time of purchase. I know one forum member asked me about this topic and he has since been building a MS63 set of Saints...different dates of his choosing. For even more oomph, get 'em stickered.

In summary, the "government" doesn't really have a set definition of what "bullion" means. You have a definition that HS and no one else utilizes. IRS has their thumbrules. None of these organizations apparently talk to each other. But when its time to readdress all the ills that gold is causing the economy (lol)....the most onerous of all these interpretations will be applied. And maybe some new ones will be dreamt up as well. For now, I'd say your pretty safe with 2X and documentation to back up your "collection" of pre-1933 gold.

wondercoin

RR: As usual, thanks for the great answer!

Can you please cut and paste the precise language from PA2 of the quote below (and send it to me via PM) so I can forward it along to my customer. That is exactly what he was looking for.

"PA2 defines bullion as a coin (or any jewelry, gem, etc.) that gets at least 50% of its value from the intrinsic item."

I am not 100% sure, but perhaps this is also why to some extent 2009 Ultra High Relief $20 Double Eagles in MS69 or MS70 grade are such popular coins right now at price levels of $2,500 - $3,200/coin?

Thanks to all that have assisted with this and for most of us, I suspect we learned a thing or two from this thread.

Wondercoin

roadrunner

ICTA home page with links to PDF pages on anti-money laundering rules (ICTA links/website currently not accessible).

This should get you in the ball park. It's section 352 of PA2 that applies. Finecen.gov has the details. The ICTA blurb sums it up in a paragraph.
The actual regulation is half a dozen pages or so. The key ingredients are 50% and $50K. But the underlying plan yet to be applied to a much wider coin market
is that onerous definition of "bullion."

FinCEN.gov interim rules .....this pretty much gives all the details of the AML issues.
The final rule as I recall is pretty much the same as these. Financial Crimes Center is a part of the USTreasury that came up with the rules to satisfy the requirements for
section 352 of the Patriot Act as it applies to precious metal and gem dealers.

AngryTurtle

<< <i>NY State has a set of rules to determine sales tax on coins. If the sales price
is above a stated percentage of the metal value sales tax applies.

140% with respect to silver coins;
120% with respect to gold coins weighing 1/4 ounce or less;
115% with respect to all other coins; >>



Not to confuse things further, but common circulating cents and nickels are subject to sales tax under this law... What ever that means.

BloodMan

Roadrunner--Thanks for the detailed reply!

coinkat

If that is the concern of your client, possibly traditional World gold coins are worthy of consideration- French and Swiss 20FR, and I would stick to earlier issues and most can be bought at fair prices-

roadrunner

The verbage in FinCEN's rule as it pertains to PA2 never really mentions the word "bullion." It just discusses goods "covered" by PA2. We can infer that it's basically a definition
of "bullion." But, a more precise way of stating it is that they only defined the goods covered. In that respect there may be no relevance to what is or isn't bullion. If you have a
plastic toilet seat with circ Morgan silver dollars embedded in it, that item is probably "covered" under PA2. Just ignore all this crap and "have fun with your coins" like HRH says.

The interim final rule applies to “dealers” in “covered goods.” “Covered goods” include jewels, precious metals, and precious stones, and finished goods (including but not limited to,
jewelry, numismatic items, and antiques) that derive 50 percent or more of their value from jewels, precious metals, or precious stones contained in or attached to such finished goods.

jmlanzaf

Here's the FTC version of it:

https://consumer.ftc.gov/articles/0135-investing-bullion-and-bullion-coins

Note they also define "bullion" to be coins whose price fluctuates with spot which, again, would appear to exempt anything with a significant numismatic premium.

jmlanzaf

Here's USPS on the subject:

about.usps.com/publications/pub122/pub122_v07_revision_092016_013.htm

Note they also separate collectible coins from bullion.

ricko

Great old thread .... and thanks for the updates....Those who stack - or even collect - should read, understand and file these links. Cheers, RickO

derryb

@OPA said:
I'm not sure if this is still applicable...it was in 2010

"Tax obligations are the same for both numismatic and bullion coins. Gains on coins held longer than one year are taxed at the collectibles rate, which is 28%. Short-term gains are taxed as ordinary income."

Still holds true, you are correct

Note that the tax rate for a collectible held long-term (more than a years) is also capped at 28%. This results in a higher tax rate on that gain for most Americans (who average a 15% overall tax rate) while it could be a lower tax rate for a high income person who pays more than 28% on their other income.

derryb

My 2 cents:

spot value: weight of the PM content multiplied by current spot price of the precious metal.

bullion: a refined and stamped weight of precious metal whose value is based simply on current base metal value, weight and fineness and usually has an added bullion premium to cover the cost of fabrication, shipping and an added premium for current demand of the specific product.

All rare and collector coins are bullion but only up to the point where they meet the bullion definition. Any added value due to rarity or collector demand is the coin's numismatic premium. Technically a PM rare or collector coin has a bullion premium and an additional numismatic premium. Even the rarest of precious metal coins will never be worth less than their bullion value - for this reason bullion value is, even if low, a part of their value.

derryb

@jmlanzaf said:
Here's USPS on the subject:

about.usps.com/publications/pub122/pub122_v07_revision_092016_013.htm

Note they also separate collectible coins from bullion.

Note this info is for payable claims. But, unfortunately they do not define bullion. The important take away from this info is that bullion (however they might define it) will only be covered by USPS insurance to a max of $15 unless it is sent registered mail (max of $50,000).

derryb

I suspect the government definition of "bullion" will depend on which branch of the US government is applying it and how they are applying it.

We do know that the US Mint refers to American Eagles as bullion.

philographer

Honestly, I would not answer their question as they expect you to. I would challenge why they are asking the question. And I would ask them if they believe laws can change.

I would tell them that the government can confiscate anything at any time...it’s just a matter of changing laws.

One day you can buy as much cough syrup as you want, then one day it’s restricted. One day the drinking age is 19, then it’s 21. One day pot is illegal, and one day it’s suddenly legal. Laws change.

derryb

I would tell them that if they are concerned about confiscation (or eventual illegality to own) they should buy gold jewelry.

The only possible reason i can imagine for future gold confiscation is if it is needed to back the currency. I don't see this ever happening.

jmlanzaf

@derryb said:
I suspect the government definition of "bullion" will depend on which branch of the US government is applying it and how they are applying it.

We do know that the US Mint refers to American Eagles as bullion.

Actually, the DON'T refer to PROOF eagles as bullion... They can't even make up their mind on that.

OPA

I'm sure the OP got his answer long time ago from this 5+ year old thread. Not sure why it was resurrected.

jmlanzaf

@OPA said:
I'm sure the OP got his answer long time ago from this 5+ year old thread. Not sure why it was resurrected.

You should - it's based on what came up in the other thread upon which you commented.