Collectors and investors browsing the Internet, trade publications and newsletters often see dealers describe certain coins as “private gold” or “nonreportable,” and other coins as “reportable.”
What does this mean, and is there anything to it?
The “simple” answer comes from the IRS:
“A sale of precious metal (gold, silver, platinum, or palladium) in any form for which the Commodity Futures Trading Commission (CFTC) has not approved trading by regulated futures contract (RFC) is not reportable.
“Further, even if the sale is of a precious metal in a form for which the CFTC has approved trading by RFC, the sale is not reportable if the quantity, by weight or number of items, is less than the minimum required quantity to satisfy a CFTC-approved RFC.”
I didn’t make that up. It’s actually from page 4 of this year’s instructions for IRS Form 1099-B. So, we start with the meaning of “reportable.” It means that the dealer must report the sale of the coins to the IRS on a 1099-B form.
Which coins are covered? The instructions don’t say, but fortunately the CFTC does, although you’ll need some time on the computer to find a list.
The coins are: South African Krugerrand gold coins, Canadian Maple Leaf gold coins, Mexican gold 50-peso coins, and U.S. 90 percent (pre-1965) silver dollars, half dollars and dimes (but not quarter dollars). Note that modern U.S. bullion coins such as gold and silver American Eagles are not on the list, and in my opinion, coins bought and sold for numismatic value (rather than metal value) are also excluded.
Now that we know the coins, let’s look at the minimum quantities for “reportability.”
Back to the IRS:
“[A] broker selling a single gold coin does not need to file Form 1099-B even if the coin is of such form and quality that it could be delivered to satisfy a CFTC-approved RFC if all CFTC-approved contracts for gold coins currently call for delivery of at least 25 coins.”
The CFTC-approved contracts for “bulk gold” require a minimum of one kilogram (32.15 troy ounces) weight at .995 or better fineness, which means that kilo gold bars or smaller bars adding up to a kilo or more are reportable. For gold and silver coins, the quantities are as follows:
➤ Krugerrand gold 1-ounce, 25
➤ Maple Leaf gold 1-ounce, 25
➤ Mexican gold 50 pesos, 25
➤ U.S. 90 percent silver dollars, 1,000
➤ U.S. silver half dollar (any type), 2,000
➤ U.S. silver dime (any type), 10,000
So these are the coins and quantities that must be reported. The IRS takes the requirements seriously, and warns dealers against customers trying to evade their obligations by dividing up their sales into smaller units, saying that “Sales of precious metals for a single customer during a 24-hour period must be aggregated and treated as a single sale,” and that even this time limit doesn’t hold where “the broker knows or has reason to know that a customer, either alone or with a related person, is engaging in sales to avoid information reporting.”
Who cares about having to report their coin sales? Believe it or not, a lot of people care.
A 1099-B form requires reporting the seller’s full name, address and Social Security number. Of course, the IRS already has those, but the dealer filling out the form might not, and for many people the fewer third parties that have their personal information, the better.
So while everyone must pay taxes on profits they earn from selling precious metals, which precious metals you purchase determine what information you may have to disclose later.
Armen R. Vartian is an attorney and author of A Legal Guide to Buying and Selling Art and Collectibles.