How does gifting or inheriting physical gold or silver affect the recipient's cost basis?

1. The core rule: gift = carryover basis, inheritance = step‑up

Tax guidance and market guides agree on the central distinction: when someone gives you physical gold or silver during life you generally “take the donor’s adjusted basis” — in short, you inherit the giver’s cost basis and any embedded gain carries forward ^{[1] [5]}. By contrast, property received at death typically gets a cost basis equal to the fair market value on the date of death (a “step‑up”), so heirs’ basis is reset to the estate valuation ^{[2] [4]}.

2. Why this matters in dollars and decisions

Because gold and silver prices move, the difference between the donor’s original purchase price and the market value at the time of transfer can be large. American Bullion explicitly illustrates that a coin bought for $400 and gifted later when worth $2,400 still carries the $400 basis for the recipient — selling at $2,500 would leave roughly $2,100 of gain — whereas an inheritor’s basis generally would be the $2,400 death‑date value, eliminating that gain if sold immediately ^[3]. Legacy planning publications make the same point: receiving an inheritance can substantially reduce capital gains tax compared with an inter vivos gift ^[4].

3. How to document basis and why records matter

Authors across the sources stress paperwork: keep original purchase receipts, appraisal and sale records, and any gift documentation because basis calculations depend on historical cost, dates and adjustments ^{[2] [4]}. If a gift’s fair market value is less than the donor’s basis, IRS rules create special carryover/loss considerations — the recipient’s basis for gain and loss can differ — so documentation avoids costly mistakes ^[1].

4. Reporting and tax rates: collectibles nuance

Physical gold and certain coins are treated as collectibles by the IRS, which affects the tax rate applied to long‑term gains (collectibles can be taxed up to 28% under U.S. rules), so knowing your correct basis matters to compute taxable gain and apply the correct rate ^[6]. Sources note you don’t pay income tax merely for receiving a gift or inheritance, but capital gains tax applies when you later sell the metal, calculated against your basis ^{[7] [6]}.

5. Practical choices and planning tradeoffs

Estate planners and commentators flag a tradeoff: gifting during life can shift future appreciation out of your estate but also transfers your low original basis to the recipient, potentially creating large future taxable gains for them; transferring at death often grants heirs a stepped‑up basis and avoids that embedded gain but may have other estate‑tax consequences if the estate is large ^{[4] [5]}. Sources recommend matching transfer timing to goals — tax minimization versus wealth‑transfer — and keeping records and professional advice on hand ^{[4] [3]}.

6. Areas not fully covered in reporting and limits

Available sources do not mention every nuance — for example, state‑level inheritance taxes, how different valuation dates (alternate valuation or six‑month rules) might affect basis, and detailed rules for collectibles versus bullion in every scenario are not exhaustively addressed in the provided material (not found in current reporting). Also, the interaction of gift‑tax filings (Form 709) with basis adjustments is discussed only in summary; consult a tax advisor for complex estates ^{[1] [4]}.

7. Bottom line for recipients and givers

If you receive gold or silver as a gift during someone’s life, expect to inherit their purchase basis and potential taxable gain when you sell ^{[1] [3]}. If you inherit it after death, expect a stepped‑up basis to the market value at death, which often eliminates historic embedded gains if you sell soon thereafter ^{[2] [4]}. Given the financial stakes, sources uniformly recommend preserving transaction records and consulting a qualified tax or estate professional before transferring or selling precious metals ^{[2] [4]}.