@kjs94gt wrote:
The family member gifted this gold to us while he was alive, but has now passed away. All of this occurred in the same tax year.
@KrisD15 is incorrect and @ColeenD3 is correct.
If the items were gifted while the giver was alive, your cost basis is the giver's cost basis. The giver's cost basis is what they originally paid. (If the giver themselves received the property as a gift, or inheritance, it become more complicated, and there are a few other rare tweaks, but most of the time, the giver's basis is simply the price they paid.)
Your problem is that, if audited, the IRS does not have to give you credit for any basis you can't prove. We would probably be safe in assuming that the original price was at least $35 per ounce, since your relative could not have bought the gold before they were born. If you have some idea of at least what year your relative started buying gold, you might make a reasonable guess based on historical prices. Coins with mint dates can't have been bought before the date in question. You might have other clues. But, if audited, it will all come down to whether the individual auditor will give you credit for a reasonable guess or not.
Then, as stated above, you will owe capital gains tax on the difference between the selling price and the cost basis (whatever basis you can prove), and the capital gains rate for gold is higher than for other investments.
The one way you could avoid this problem is to "bury" the gold somewhere until you die. Your heirs would get a cost basis equal to the market value on the day they died, and their resulting capital gains tax would be much less than yours.
If you decide to spend the gold, you will need to come up with a reasonable estimate of the basis, and hope you aren't audited.
