Inherited Gold and Silver Coins: How Stepped-Up Basis Works

Gold and silver coins often pass from one generation to the next. Heirs then ask a simple question: "If I sell these, what do I owe tax on?" The answer starts with one number, called your basis. This guide explains how the IRS sets that number for inherited coins and bars, and how it differs from coins you receive as a gift. It is general education, not tax or legal advice. Inheritance tax questions depend on the estate, the state and the type of account, so talk to a qualified tax professional before you act.

What is "basis," and why does it matter?

Basis is, in simple terms, the starting value the IRS uses to measure your gain or loss when you sell. If you sell for more than your basis, you have a gain. If you sell for less, you have a loss. Our guide to taxes on physical gold outside an IRA shows how that gain is reported.

For coins you buy yourself, basis is generally what you paid (see Publication 551). For coins you inherit, the rule is different.

How does the IRS set the basis of inherited coins?

The IRS explains the main rule in Publication 551, Basis of Assets: "Generally, the basis of property inherited from a decedent is one of the following." Its list includes these two choices (it also lists rarer cases, such as special-use valuation of farm or business real property, which do not apply to coins):

• the fair market value (FMV) of the property at the date of the person's death; or
• the FMV on the "alternate valuation date," if the personal representative of the estate chooses to use alternate valuation.

The tax law behind this is section 1014 of the Internal Revenue Code. Subsection (b) covers property "acquired by bequest, devise, or inheritance," and it sets the basis at "the fair market value of the property at the date of the decedent's death," or at the alternate valuation date if the estate made that election under section 2032.

People call this a "stepped-up" basis when the coins were worth more at death than the owner paid. The same rule can work the other way. If the coins were worth less at death than the owner paid, the basis is lower, and some people call that a "step-down." The rule itself is the date-of-death value, whichever direction it moves.

A simple example

The numbers below are made up to show the arithmetic. They are not market data and not a prediction.

In this example the gain is measured from $25,000, not from $10,000. Your own facts may differ, for example if the estate used the alternate valuation date.

What is the "alternate valuation date"?

It is an election the estate's personal representative may make. Publication 551 lists it as one of the possible bases, and section 1014 refers to it as an election under section 2032. This guide does not explain how or when an estate may use it. Ask the estate's executor or attorney which date was used.

Does the estate's tax return affect your basis?

It can. Publication 551 says that when an estate is required to file a federal estate tax return (Form 706), beneficiaries "generally will receive a Schedule A (Form 8971)" showing the estate tax value of property distributed to them, and "Certain beneficiaries are required to use this value as the initial basis in the property received from the estate." Section 1014(f) of the tax law says that, in the cases it covers, the basis of property under the date-of-death rule "shall not exceed" the value finally determined for estate tax purposes. It has conditions, so ask a tax professional whether it applies to you.

If you receive a Schedule A (Form 8971), keep it with your records. If the estate was not required to file a federal estate tax return, ask the executor how the coins were valued.

How are gifts different from inheritances?

A gift made during life follows another rule. Publication 551 says that if the gift's fair market value was equal to or more than the donor's adjusted basis, "your basis is the donor's adjusted basis at the time you received the gift." That is often called a carryover basis. If the FMV was less than the donor's adjusted basis, the IRS says your basis depends on whether you have a gain or a loss when you sell, so see Publication 551 for that case. Publication 551 explains further adjustments, including for any gift tax paid.

Is there an exception for coins the owner gave away shortly before death?

Yes, a technical one. Section 1014(e) says that, for a decedent dying after December 31, 1981, if appreciated property was acquired by the decedent as a gift during the one-year period ending on the date of death, and the property then passes back from the decedent to the donor (or the donor's spouse), the basis in the donor's hands is the decedent's adjusted basis immediately before death. This is a technical rule. If it might apply, a tax professional should review it.

When you sell: long-term or short-term, and what rate?

Whether a gain is long-term depends on how long you held the asset. The IRS says (Topic 409) that if you hold an asset for more than one year, "your capital gain or loss is long-term." Topic 409 also says property acquired from a decedent is an exception to the usual holding-period rule and points to Publication 544. The tax law itself (section 1223, as printed in the 2011 U.S. Code edition we opened) provides that a person who acquires property from a decedent, with basis set under section 1014, and sells it within one year after the death is "considered to have held such property for more than 1 year." We did not open the current-year text of that section or Publication 544 this session, so confirm the holding-period rule with a tax professional or the IRS.

For the rate, Topic 409 says: "Net capital gains from selling collectibles (such as coins or art) are taxed at a maximum 28% rate." The Schedule D instructions define a collectibles gain as a long-term gain "from the sale or exchange of a collectible that is a capital asset," and say collectibles include "metals (such as gold, silver, and platinum bullion)." The 28% figure is a maximum, and your actual rate depends on your whole tax picture.

What records should heirs keep?

Section 1014 and Publication 551 turn on value at a specific date, so documentation matters. Practical items to gather include the date of death, the estate's valuation of the coins (if any), a list of what was received, and any Schedule A (Form 8971). This list is our suggestion of useful records, not an IRS checklist.

What this guide does not cover

• Coins inside an IRA. An inherited IRA follows separate rules. See IRA gold versus gold you hold yourself and the collectibles rule. We did not open IRS rules on inherited IRAs for this article and make no claim about them.
• State inheritance or estate taxes, and state sales or income tax. See our state tax overview.
• How to value coins for an estate. Valuation is a job for a qualified appraiser or the estate's advisers.
• Whether and when to sell. That depends on your situation and is not something this site can advise on.

Related questions

• How are sales reported to the IRS? See Form 1099-B for gold and silver and our tax forms guide.
• What can go wrong? See common gold IRA tax mistakes.
• Back to the Gold IRA taxes overview.