How is cost basis determined for inherited physical gold or silver under current US tax law?
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Executive summary
Inherited physical gold or silver generally receives a "step‑up" in cost basis to the fair market value on the decedent’s date of death, so tax when sold is calculated on gains above that stepped‑up value [1] [2]. Because the IRS treats physical precious metals as collectibles, any taxable gain on sale can be subject to the collectibles capital‑gains rules (including a long‑term maximum rate of 28%), and inherited property is treated as long‑term by default [3] [1] [2].
1. What "cost basis" means for inherited metals and the step‑up principle
Cost basis is the tax measure of what an heir is treated as having “paid” for inherited property; for physical gold and silver the common rule reported by estate and tax commentators is that the basis is reset to the fair market value on the date of the decedent’s death — the so‑called step‑up in basis — and that new basis is what determines gain or loss on a later sale [1] [2] [4]. Multiple industry and tax‑advice sources emphasize that this step‑up can erase gains that accumulated during the decedent’s lifetime, meaning an immediate sale at roughly that market value often creates little or no capital gain for the heir [4] [1].
2. How gain is calculated when the metals are sold
When the heir sells the inherited metal, taxable gain is the difference between the sale price and the stepped‑up fair market value used as the cost basis at inheritance; if the sale price exceeds that date‑of‑death value, the excess is a capital gain to be reported on the heir’s return [2] [1]. The IRS treats physical bullion and coins as collectibles for capital‑gains purposes, so long‑term gains on collectibles are subject to a maximum 28% federal rate rather than the lower preferential rates that apply to many other capital assets [3] [5].
3. Timing and long‑term status — practical tax effects
Inherited property is treated as long‑term property for capital‑gains purposes regardless of how long the heir holds it, so heirs generally avoid short‑term ordinary‑income treatment even if they sell soon after inheriting (that long‑term status is highlighted by estate advisers and legal summaries) [1]. That interacts with the collectibles tax ceiling: because inherited metals are long‑term by default, any gain when sold typically falls under the collectibles long‑term treatment, which can be more favorable than short‑term ordinary rates but still capped at 28% for federal tax [3] [2].
4. Valuation, documentation, and practical steps heirs must take
Because the stepped‑up basis equals fair market value at death, professional appraisal and clear documentation are repeatedly recommended by estate planners and precious‑metals advisors to substantiate the basis figure used on tax returns — absent reliable valuation records, heirs risk disputes or mistakes when reporting a sale [1] [4]. Industry sources also warn that some transactions involving dealers or platforms will generate tax forms (such as 1099‑B) and that sales proceeds and basis must be reported appropriately on Schedule D and Form 1040 where required [6] [7].
5. Exceptions, related rules and limits of the reporting here
Not all situations are identical: transfers inside retirement accounts have different tax rules and the step‑up concept does not work the same way for assets held in tax‑deferred IRAs, which have distinct distribution and taxation rules for inherited accounts [8]. Estate taxes, state sales taxes, and other local rules may also affect net outcomes but are separate from the federal cost‑basis rule and depend on estate size and state law — those issues are noted by estate analysts but require case‑specific review [9] [10]. The reporting reviewed here documents the general federal income tax treatment but does not substitute for professional tax advice tailored to a particular estate.
6. Competing narratives and who benefits from them
Precious‑metals dealers and some promoters emphasize the step‑up advantage as a near‑guaranteed way to eliminate heirs’ capital gains — a useful selling point — while tax and legal advisers stress valuation, documentation and the collectibles tax cap as real constraints that can leave heirs with taxable events if market movement produces gains after inheritance [4] [1] [3]. Both perspectives are accurate in part: the step‑up can eliminate past unrealized gains, but subsequent appreciation over that death‑date value is taxable under collectibles rules and must be reported with supporting appraisal and sales documentation [2] [6].