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Originally posted by Mmmm, Burger (C.J.)
Sure enough, but you could fix this problem. Or your fire sale problem. Just make the tax due at 9 months, but allow people to claim a payment plan if the estate assets are substantially illiquid. Pay back over 5 years, say, at decent interest rate (so no free loans). Hardship mostly eliminated. Just because you can't sell it altogether doesn't mean Mars should be exempt.
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No one likes to see a friend or relative die, however it can be a joy to receive an inheritance once they are gone. Make certain you understand the IRS regulations regarding inheritance so if you choose to sell off any numismatic holdings you acquire this way. You will want the liquidation of these holdings to also be a joy rather than a burden to you.
IRS Publication 551, Basis for Assets (revised in May 2002) addresses inherited property as well as that received as a gift. According to this publication, "Your basis in property you inherit from a decedent is generally one of the following: (1) The FMV [Full Market Value] of the property at the date of the individual's death. (2) The FMV on the alternative valuation date if the personal representative for the estate chooses to use alternative valuation. For information on the alternate valuation date see the instructions for Form 706."
In this area of the publication much more than numismatic inheritance is reviewed, but the two items presented here are the only comments having a direct impact on such numismatic items. The publication further states, "…If a federal estate tax return does not have to be filed, your basis in the inherited property is its appraised value at the date of death for state inheritance or transmission taxes."
There are situations under the current tax codes where due to the value of the estate no taxes were collected at the time of its disbursal. There may be taxes, however, if you choose to sell what you have inherited.
Numismatic Items or Bullion?
Another factor directly impacting taxes is if what you are about to sell is considered to be numismatic or bullion. 1984 Federal Register Vol. 49 No. 3 discusses this on page 645 through page 648.
According to this document, the regulation requires that coin dealers report all gold bullion liquidations on Form 1099. Coins with a premium above 15 percent do not have to be reported by dealers. (The important thing here is that the reference is to "dealers," not to "hobbyists." What the regulation is trying to do is to distinguish between what are bullion and what are collectible gold and silver coins.
On December 28, 1992 this law was amended to allow exceptions from Form 1099 reporting. According to this amendment, "A sale of a precious metal in a form that may be used to satisfy a CFTC-approved regulated futures contract, is an excepted sale, … provided the quantity … sold, is less than the minimum amount needed to satisfy a CFTC - approved contract, and in any form other than that which may be used to satisfy a CFTC - approved contract."
The "Reason to Believe" clause nullifies exceptions "if a broker has reason to know that a customer, either alone or together with a person related (related means more than just family) to the customer, is engaging in one or more sales with a principle purpose of avoiding information reporting" i.e. Form 1099s.
Conclusions
Although many numismatists, those receiving numismatic gifts, or those inheriting numismatic items may want to consult with their accountant or lawyer regarding tax implications and their legal options, this presentation should give an accurate portrayal of what may be necessary for your individual situation.
When selling your coins through Heritage you have options to consider. You may want payment checks to be endorsed to people to whom you wish to make a gift during your own lifetime, or to foundations or trust funds you have established for tax purposes, rather than directly to yourself. Discuss this with your Heritage account executive before you sign any agreements with us.
The sale of your numismatic possessions should be a time of satisfaction for you, regardless of if you assembled the collection yourself, were given them as a gift, or inherited them. Understanding the tax implications of your financial gains, and how to cope with these tax implications to your own best advantage, is important.
