Gifted Physical Gold and Tax Implications: Are there any?

[Snoopy6-43]

Giving a monetary gift is easily documented by a check. However gifting the value of  coins is not. How does one document the value of coins being gifted? Is a lawyer required with witnesses???

[Snoopy6-43]

How do you establish  the  current cost basis in a gift of coins??? You can gift money by check, thereby establishing a basis. However, the value of coins upon gifting  must be legally documented, or the value of the coins itemized somehow. 

[Snoopy6-43]

HOW do you document the "cost basis" of coins??

[Opus 17]

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@Snoopy6-43 wrote:

How do you establish  the  current cost basis in a gift of coins??? You can gift money by check, thereby establishing a basis. However, the value of coins upon gifting  must be legally documented, or the value of the coins itemized somehow. 

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The cost basis of a gift is NOT the market value upon gifting.  The cost basis of a gift is whatever the giver's cost basis is.  The giver's cost basis might be their purchase price, or it might be something else, depending on how and when the property was acquired.  (For property that was previously used in a business, it is even more complicated.)

If the gift was more than $15,000 in value, then the giver was required to file a gift tax return.  That establishes the cost basis.  If no gift tax return was filed (because the gift was small enough that it did not require a gift tax return, or because the giver failed to file) then you have to rely on information from the giver to determine the basis.  

It may be hard to document your cost basis in a gift, if the giver can't or won't provide it.  The IRS does not view that as their problem.  If you are audited and can't prove your cost basis, the IRS can determine the entire selling price is a capital gain.  

[fred_flitzhoff]

The advice on the board should be checked out carefully.  For one, "reportable" transactions aren't as described.  Check: 

https://fisherpreciousmetals.com/resources/general-market-info/truth-precious-metals-reporting/

for a well-written summary.  I also wonder whether your desire to be bulletproof against an IRS audit may be leading you to overpay taxes.  It may be that the gift you received was a Gift Causa Mortis - a deathbed gift - which implies a different tax treatment, as if the gold were inherited.  The cost basis would then be relatively simple to compute, and much smaller than a usual gift.

I am not a lawyer or tax pro, but if the amount involved is substantial, hiring one or both may be worth it.  Their professional rationale would then become the rationale for how you file your taxes, and if the professional is reputable the risk, even if there were to be an IRS audit, is very likely limited to any amount later determined to be underpaid.

I agree with the post that you should pay what is due, but as Judge Leaned Hand said:

"Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes."

Best of luck.

[Snoopy6-431]

Ok. So when I hand my Grand kid a 1 oz gold coin, that I bought many years ago, Then I need to have a notarized  letter to my grand kid indicating the date I gave it to him. That letter should establish his "adjusted basis" being the price of gold for that day??

[Opus 17]

@Snoopy6-431 

No, you aren’t reading what is being written.

The cost basis of a gift is not the  market value on the date of the gift. The cost basis of a gift is the cost basis of the giver.

That means that if you give your grandson a gold coin, the cost basis that your grandson must use on his tax return, whenever he sells the coin, is the price that you originally paid.  Or, if you yourself inherited the coin, your cost basis is the market value on the date the previous owner died.

If you want to help your grandson (in this example) pay the least amount of capital gains possible, you would give your grandson a gift letter that gives the date that you purchased the coin and the amount that you paid.

Granted, most people probably fail to do this. You are commendable in trying to look ahead and help the recipients of your generosity pay the least amount of tax possible.

Depending on the sizes of the gifts that you intend to make, you may wish to speak to a financial planner. There are strategies that you could use to reduce the tax that your gift recipients would owe, if and when they sell your gifts.  These strategies might not be as impressive looking as handing a gold coin to a young person.  But you may want to at least educate yourself on your options.