Grandparents gifted a coin collection

[psoc2022]

Hello,

My grandparents (still alive) are cleaning out their basement and gave me their coin collection back in 2021 (There is no document of this, it was just brought to my house) to be divided amongst 5 grandkids.

All 5 grandkids agreed to sell the coin collection and divide the money amongst us equally. My husband and I just sold the collection for ~$37k. I'm trying to figure out how I account for any applicable taxes so I can send out checks. I don't want to hold onto this money for a year until tax season in 2025 if possible.

We have receipts for a lot of the big ticket coins and it looks like we sold it mostly at a loss. For example, there were some golden eagle gold coins that my grandpa purchased for $2800 that we sold for $2054. I believe $2800 would be our cost basis? And there were a lot of smaller value coins that we don't have any record of. Most of the value came from the value of the precious metals and not the actual coin value.

I understand from doing some research that sometimes it matters what my grandpa originally paid for the coins, sometimes it matters what the value was when it was gifted to us, and some suggestions were just to pay the 28% capital gains at the time of sale to cover yourself. 

I also understand that the gift limit is $18k in 2024, but since this was gifted to us years ago and it is going to be divided by 5 grandkids, I'm at a loss as to how to go about doing this.

Thank you all in advance for any advice you can provide!

[DianeW777]

It depends.  If you come up with an estimated date/year of the gift you can determine if any gift tax return was required to be filed at that time.  Even if we divide the cost (amount your grandfather paid in full for the collection) if divided by five grandchildren would likely be below the gift tax return filing requirement.  

The cost basis for each of the grandchildren is the same as the grandfather's cost with one exception. If the property is sold at a loss, then you must use the fair market value (FMV) on the date of the sale or the grandfather's cost basis, whichever is LESS.  You may need to separate each sale to determine the actual cost basis for each grandchild.

All that being said, since the collection does belong to each grandchild equally and separately, and you were the grandchild that actually sold the collection where the money received might be reported under your social security number (SSN), you can nominee each grandchild's portion of the gain to them.  See the information below on how to process the nominee amounts. Then each of you report only your portion of the sale.  The sale of these collectibles will have a holding period the same as your grandfather.  In other words your purchase/acquired date would be the same as though  you bought them on the original purchase date.

Nominee Returns.

Generally, if you receive a Form 1099 for amounts that actually belong to another person or entity, you are considered a nominee recipient. You must file a Form 1099 with the IRS (the same type of Form 1099 you received).  You must also furnish a Form 1099 to each of the other owners. 

File the new Form 1099 with Form 1096 (this is a transmittal for the 1099) by mailing to the Internal Revenue Service Center for your area. (Provided on the Form 1096)

• On each new Form 1099, list yourself as the payer and the other owner, as the recipient. On Form 1096, list yourself as the nominee filer, not the original payer.  The nominee is responsible for filing the subsequent Forms 1099 to show the amount allocable to each owner.

The forms filed with the IRS should be the red copy so if you don't have a color printer, go to the IRS website and order the forms here (2023 versions): 

• Form 1096
• Form 1099-B  (be sure to check 'Collectibles' in box 3 so that the tax is calculated appropriately) 

Capital gains tax is higher for collectibles than other sales held long term.  Gift tax limits are shown below for your convenience:

[Mike9241]

when each grandchild reports the sale on form 8949/schedule D they need to indicate it was a sale of collectibles. 

[psoc2022]

Thank you for the detailed response. I shouldn't need to estimate the year it was gifted since it was 2021.

I have not recieved a 1099 form but would that not come until tax season next year? The coin shop said they do not report the sales/payments to the IRS so I'm not sure where a 1099 would come from. 

[psoc2022]

Will the other grandchildren have any sales to report since it was all under my name? 

[ThomasM125]

The grandkids will not have to report anything since the money they receive is a gift to them and as such is not taxable to them.