Alan L. Olsen

Selling Gold Coins

Q: My mother-in-law wants to convert some gold coins, specifically American Gold Eagles and Canadian Gold Maple Leafs, into CDs and/or money market funds. How does one convert gold coins into cash in order to do this?  What are the IRS reporting requirements?

A: In an unsettled economy, investing in gold coins becomes more popular.  Given that numismatic coins are often more valuable than bullion alone, this heightened interest is no surprise. The American Eagle, for example, is the most common investment gold coin in the United States. Buyers and sellers like it because they know exactly what is at stake: One unique attribute of this coin, which uses the 22 karat standard established for gold circulating coinage more than 350 years ago, is that its weight and purity are guaranteed by the U.S. Government.

From high-end jewelers to pawnshops, you will have little trouble finding businesses interested in selling or buying your gold coins.  However, to maximize your profit – and give you some peace of mind – you need to do a little research. Here are a few tips:

• Locate a reputable dealer.  In addition to the Better Business Bureau and other resources, the U.S. Mint’s own website (www.usmint.gov) lists dealers by state.
• Call around, as prices to buy and sell can vary greatly. In addition, prices change continually throughout the day, so try to get a time commitment for how long a quote will be valid. 
• Be very wary of TV, Internet and “get cash fast” ads.

As for taxes, Uncle Sam takes a bite out of almost every asset sold and coins are no exception. In fact, collectibles are subject to one of the highest rates of federal taxation on investment property. Capital gain from a collectible sale is taxed at 28 percent. This is significantly higher than for stocks, securities and many other investments, which enjoy a 15 percent capital gains tax rate (5 percent for taxpayers in the 10 percent to 15 percent tax brackets).

There are two other tax issues to consider. First, relates to the valuation of gold coins. When coins have numismatic worth exceeding their face denomination, the amount realized is the numismatic value of the coins, not the face value. Second, if you want to invest in the price of gold rather than the coins’ collectability, consider investing in gold strictly as a precious metal, such as through gold-mining stocks. That interest, and the gain realized by selling it, is entitled to full capital gain treatment.

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