How do I determine the cost basis for inherited or gifted bullion and coins?
Executive summary
Heirs generally receive a stepped‑up cost basis equal to the fair market value (FMV) of bullion or coins on the decedent’s date of death, so capital gains tax applies only to appreciation after that date (see multiple guides, e.g., Investopedia and Accounting Insights) [1] [2]. Gifts are different: recipients usually take the donor’s basis (carryover basis) except in special loss situations, so a gifted coin’s tax outcome depends on the donor’s original basis, any gift‑tax adjustments, and the FMV at gifting (sources covering gifts and carryover rules include Claimyr, Intuit threads and CoinTracker summaries) [3] [4] [5].
1. What “cost basis” means for coins and bullion — the quick mechanics
Cost basis is the figure you subtract from sale proceeds to compute capital gain or loss; for physical precious metals the IRS treats them as collectibles and long‑term gains can face the collectible maximum rate on appreciation when sold [1] [6]. If you inherited metals, most professional explainers say the basis is reset to FMV on the date of death (the “step‑up”) and heirs are taxed only on gains after inheritance [1] [2] [7]. If you received coins as a gift, the recipient generally “inherits” the donor’s adjusted basis (carryover basis), so future tax depends on what the donor originally paid and the donor’s acquisition date [3] [4] [5].
2. Inherited bullion: why the step‑up matters and practical steps
Estate‑planning and bullion sites, and mainstream explainers, emphasize that the stepped‑up basis wipes out unrealized gains accumulated in the decedent’s lifetime: heirs pay tax only on post‑death appreciation when they sell [8] [7]. Practical steps: obtain an appraisal or contemporaneous market quotes to document FMV at death; preserve estate inventory, appraisals or executor records; and note the holding period is treated as long‑term by default for inherited assets [7] [2].
3. Gifted bullion: risk of inheriting the donor’s tax history
When metals are given during the giver’s lifetime, the recipient usually takes the donor’s basis and holding period — meaning capital gain is measured from the donor’s original purchase price, not the gift date — unless the asset had depreciated at gifting, in which case special IRS rules split outcomes for gains vs. losses [3] [5]. Several community tax discussions reflect real‑world headaches when families lack receipts: if you can’t prove the donor’s basis, you may face scrutiny or have to supply a reasonable substantiation in an audit [9] [10].
4. Valuation complications: numismatic vs. bullion value
Sources repeatedly warn that treatment differs only for valuation complexity: common bullion tracks spot prices and market pricing sheets can suffice; numismatic (rare) coins require separate appraisal because collectibility, not just metal content, determines FMV and therefore basis [11] [2]. If a coin has both metal and collector value, value each component and document whichever drives FMV at the key date [2] [12].
5. Reporting, rates and state‑level caveats
When you sell, report gains or losses on your federal return (Schedule D/other forms referenced by guides); the IRS treats physical metals as collectibles, so long‑term gains may face a higher 28% ceiling rather than the lower ordinary long‑term capital gains brackets [1] [3] [6]. Also check state inheritance or estate taxes: only a handful of states levy inheritance tax, and federal estate‑tax exemptions are high in current reporting, but state thresholds and rules vary [13] [14].
6. What to document and next steps to reduce friction
All sources stress documentation: wills, executor inventories, appraisals, dealer receipts, storage and insurance records, and Form 709 if large lifetime gifts require reporting — these items substantiate FMV or donor basis and guard against audit adjustments [1] [2] [15]. If you lack original receipts for gifted items, compile alternative evidence (appraisals, transaction dates from bank records, mint dates) and consult a tax professional about risk and how to report conservatively [9] [4].
7. Competing views and policy context
Reporting pieces and policy explainers note that the step‑up at death is politically contested — some proposals would replace it with carryover basis, which would tax heirs on lifetime appreciation — but under current law heirs get the step‑up [8] [16]. This is relevant to estate planning decisions and whether families should sell or hold inherited metals.
Limitations: available sources above cover U.S. federal treatment, common industry practice, and practical recordkeeping; available sources do not mention detailed line‑by‑line IRS form instructions or state‑by‑state sale‑tax rules — consult a CPA or estate attorney for precise filing and valuation in your situation [1] [7].