Paying taxes on coin sale?

[Anonymous]

the coins probably have a basis - what you paid for them so the $10K you paid would be reduced by that basis reported on schedule D/form 8949 as a collectible. 

[Anonymous_]

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@LoveBug71 wrote:

They were my grandmothers and inherited. 

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If you inherited the coins, you need to know the fair market value on the date of death of your grandmother.

At this point, if there is an inventory of some sort, you could have an appraisal done to determine that value.

[Anonymous_]

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@LoveBug71 wrote:

I have no way of knowing how much she paid for them. The dealer at the shop where we sold them, said she maybe paid $3-4 bucks each for the silver coins.

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It does not matter how much she paid for them because the value of the coins, being inherited, would be stepped up to their fair market value as of the date of death of your grandmother.

If you sold the coins shortly after she passed, it is likely that your basis was the same as the selling price (i.e., you had no gain on the sale). 

[Opus 17]

You may have a taxable capital gain.

You have a capital gain if you sold the property for more than it's cost basis.  For inherited property, cost basis is the fair market value on the date the previous owner died.

As long as the property was held more than one year (combined between you and your grandparent) then this is a long-term capital gain which is taxed at 15% for most people and 20% for high income taxpayers. However, if audited, you must be able to prove the cost basis you claim.  The IRS does not have to give you credit for any cost basis that you can't prove.

You report the sale of the coins as capital gains income on schedule D, this is in the "Sale of assets and other things" section of the income page.  Enter the date inherited, fair market value at the time, date sold, proceeds, and any other questions you are asked. 

You need to make a diligent effort to document and prove your cost basis, otherwise the entire amount will be taxable (zero cost basis).  If these were bulk silver coins sold for melt value (weight x daily price for silver) then you can look up the price of silver on the day your grandmother died, and calculate the approximate weight from the number and size of the coins using internet references, or you can use the same figure the coin shop used.  (If they called it 5,000 grams of silver, you can use that same figure.). Melt value would at least be a minimum value that you could reasonably prove and use as your cost basis. 

If these were special or rare coins that had a value more than melt value, you would need an appraisal to document any cost basis that was higher than melt value.  I don't know how you would go about doing that if you never had them appraised before.  

[Opus 17 · Accepted solution]

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@LoveBug71 wrote:

They were silver coins melt value. No special or rare coins. 

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So you just need to know the weight and the price of silver on the day your grandmother died.  If you don't know the weight, you can back-calculate it from the price the dealer paid and the silver price on the day you sold the coins.  (For example, if you had sold the coins for $12,000 today, when the silver price is $24.63 per ounce, that equals 487 ounces at melt value.)

Silver has been as high as $48 per ounce in the last 10 years, you might even have a loss if the price was higher on the day she died, which would be tax deductible. 

[Opus 17]

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@LoveBug71 wrote:

Her death was April of this year. She bought them a few years ago though from what we can tell. Just for their silver content. 

So, the tax form would ask me 

1. How much we received from the coin sale 

2. How many ounces of silver 🤔 

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If you are doing your taxes by hand, the assets are listed individually on form 8949, then the total gains and losses cary over to schedule D. 

https://www.irs.gov/forms-pubs/about-form-8949

You need to provide

• a description (silver coins)
• date acquired by you (you will write "inherited")
• date sold
• sales proceeds
• cost or other basis (this is where you enter the value on the date she died).

But Turbotax will do all this for you except calculate the value of the asset on the day she died.

Unfortunately, silver prices were in slump for much of 2020.  The value in April was around $15 per ounce, and the value in November-December has been around $24 an ounce.

https://www.usagold.com/reference/prices/silverhistory.php

If you use the date you sold the coins and that day's price, you can calculate the weight, then calculate the value on the day she died from the weight and that day's price. 

[LoveBug71]

Thank you!! For your help 

[Anonymous_]

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@Opus 17 wrote:

As long as the property was held more than one year (combined between you and your grandparent) then this is a long-term capital gain....

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Per Section 1223(9), inherited property (property acquired from a decedent), has a long-term holding period regardless of how long the property was actually held. 

[LoveBug71]

She had the coins for a few years. 

[Anonymous_]

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@LoveBug71 wrote:

She had the coins for a few years. 

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It does not matter how long she had them. Your holding period is long-term because you inherited the coins.

[LoveBug71]

Okay.... sorry I just don't know about this stuff. Personally, I feel you shouldn't pay on something that's already been purchased once or inherited. 

What would be the difference if I bought them, and sold them? 

[Anonymous_ · Accepted solution]

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@LoveBug71 wrote:

What would be the difference if I bought them, and sold them? 

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If you bought them yourself, then your basis would be what you paid for them (i.e., your purchase price). If you then sold them for more than your basis, you would have a gain. 

If you inherit them, your basis is typically the fair market value on the date of death of the individual who died (i.e., the decedent from whom you inherited the property).

For example, if your grandmother paid $100 for all of the coins, total, and they were worth $10,000, in total, on the date of her death, your basis would be $10,000 (not her basis, which would be $100). 

[Opus 17]

You owe tax on the gain in value.  Whatever value they had on the day you inherited them, is yours tax free.  If they increased in value since that time, that increase is taxable income to you.  (And if they lost value since that time, the loss would be a tax deduction.)

[Opus 17]

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@LoveBug71 wrote:

She passed in April - I inherited them around August sold them this month. 

For $11,950 = 700 coins (silver) 

She paid maybe $3-6 per coin 4 years ago. 

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And?  You need to do the math yourself.  Your cost basis is the value on the day she died, not the day they were physically given to you.  You can work that out by calculating the weight from the selling price and the market price of silver on that day, and then once you know the weight, you can determine the value on the day she died using the market price on that day.  You haven't provided the exact dates for us to calculate it and we really shouldn't have to do that for you anyway, it's pretty simple math.  

Then, you will owe long term capital gains tax (15%) on the gain in value between the day she died and the day you sold them.  You don't owe tax on the entire value, just the gain during the time you owned them.  We already explained how to enter this in Turbotax.