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Discussion:Donation of Gold Coins

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Discussion Forum Index --> Advanced Tax Questions --> Donation of Gold Coins


Discussion Forum Index --> Tax Questions --> Donation of Gold Coins

DAJCPA (talk|edits) said:

15 March 2014
I researched this some and could not find a definite answer. Client donates American Eagle gold coins. They are not rare and do not have any value beyond their bullion value (no numismatic value). The bullion value at the time of the donation is 40K and the charitable organization immediately sells the coins (unrelated use for the charity) . Per Rev Rul 69-63 the IRS ruled that gold coins that do not have any numismatic value are more akin to money that therefore are not considered tangible personal property for donation purposes. Does this still hold true and if so:

1)Does the client get the bullion value of the gold as a charitable donation deduction (i.e. the deduction is not limited to face value)?

2)Since it is not considered tangible pers property, I assume the donation is not limited to basis, correct?

3)Is the donation still reported in Section B of the 8283 and does the client still need an appraisal and the 8283 signed by the appraiser, or is it considered a cash donation?

I appreciate the help!

DAJCPA (talk|edits) said:

15 March 2014
Or is the donation treated like publicly traded securities?

Nilodop (talk|edits) said:

16 March 2014
Wow, DAJCPA. Good question. Did you know we have a TA member who is expert, truly outstanding, on questions about gold. He even wrote an article on it about a year ago, give or take.

DAJCPA (talk|edits) said:

16 March 2014
I think I remember Chris mentioning on TA that he wrote on article on gold. Did he reveal the location of this article?

Ckenefick (talk|edits) said:

16 March 2014
This isn't my article, but here's some stuff on it:

http://www.pgdc.com/pgdc/tangible-personal-property

I'll email you the article.

DAJCPA (talk|edits) said:

16 March 2014
Thanks, Chris. Yah I read that one (at least some of including the section on coins, anyway). It goes over the subject but does not get into the nitty gritty, leaving one to wonder. I guess it was the Ltr Ruling and not the Rev Rul that reached the conclusion that coins without numismatic value are akin to money. You ever dealt with a donation of non-numismatic coins?

Here is what the letter from the charity said:

"Be assured that the asset qualifies to be gifted in like kind.
a) Held over one year.
b) FMV is higher than basis
c) Carries no numismatic value."

What are they even trying to say here?

Nilodop (talk|edits) said:

16 March 2014
"…in like kind." Like what?

Dennis (talk|edits) said:

16 March 2014
Somehow the concept that the donation of a pound of gold coins (numismatic value less than salvage) should be treated differently than the donation of a one-pound lump of gold eludes me...♫

Ckenefick (talk|edits) said:

16 March 2014
Yeah, me too. Logically, the donation should be treated like a donation of appreciated stock...I'd treat it that way for deduction purposes, but I'd jump through all the appraisal hoops, reporting hoops, etc., as if it were tangible personalty instead.

From an income tax standpoint, in the non-charitable context, the courts have had a lot of trouble dealing with these coins...and whether or not a legal tender gold coin is "money" or "property other than money." The former doesn't give rise to a recognition event when you use it to buy something, for example. The latter, of course, does...as in satisfying an obligation with appreciated property ("property other than money," that is).

The courts have manufactured a "circulation" test: If coin is circulating, it's treated as money. If not circulating, it's property other than money. Of course, they've never defined "circulation." And the term is used in different ways in the numismatist world. What's interesting, these cases go to court because someone has used these coins in commerce, to pay wages, or to receive payment, but the courts say the coin type was "non-circulating." Hmmmm....

Spell Czech (talk|edits) said:

16 March 2014
So, I went to the IRS publications to find the answer to this question - whatever it was, I forget now - and I promptly ran aground when I read Pub 526's *definition* of "tangible personal property": " This is any property, other than land or buildings, that can be seen or touched. It includes furniture, books, jewelry, paintings, and cars. " That definition was so helpful that I felt I needed to share it, verbatim, with the group immediately.

Ckenefick (talk|edits) said:

16 March 2014
Thank you for that. What about a dollar bill, or a penny or a dime? Not sure if that would fit into the definition, as the definition starts with, "This is any property..."

Is a dollar, or a penny or a dime...property?

Frankly (talk|edits) said:

16 March 2014
"Here is what the letter from the charity said: "

Sounds like you should ask the charity to clarify exactly how the gift should be properly reported on a tax return. They should know, eh? Most charities don't say much more than "Thank you. Your gift is tax deductible to the extent allowed by law" and let it go at that. This charity gives out tax advice, or something like that.

DAJCPA (talk|edits) said:

17 March 2014
Thank you everyone for all the input. Also, thank you for the article you wrote, Chris. You're awesome!

Mscash (talk|edits) said:

17 March 2014
They do have some numismatic value but not much because they are real coins and not pretty pieces of scrap gold like Krugerands. They are not equivalent to money, meaning their face value. They would be valued as what they could have been sold for to a coin dealer.

Dennis (talk|edits) said:

17 March 2014
Logically, the donation should be treated like a donation of appreciated stock.????

Not to my logic. I see no difference between a donation of gold and a donation of diamonds. And so far as the treatment of cash as tangible personal property note thatReg. 20.2104-1(a)(2)has always included the contents of a safety deposit box.

Ckenefick (talk|edits) said:

17 March 2014
The problem with gold coins, and the ones in question, is that they are authorized legal tender with a face value. They are probably the bullion coins authorized by Reagan. If you treat as "money," you run the risk of being able to deduct their face value. If you turn a $10 face vlaue gold coin in to the Federal Reserve, they'll give you a $10.00 Federal Reserve Note (i.e. a $10 bill), they won't give you the value of the coin. If we treat as regular personalty, we have the related use problem. So, the only thing I can think of that actually makes sense here is something where we get to deduct the value, but don't get taxed on the appreciation, and don't have the related use issue...something like appreciated stock. This is how all the cases come down on it on the recognition side.

Ckenefick (talk|edits) said:

17 March 2014
or is it considered a cash donation?

It's really a muddled thing with legal tender gold coins: there's cost, face value and real value.

I tend to think the deduction should be treated as described above: A deduction for full intrinsic value of the metal (it's already been stipulated that there's no historical or numismatic value)...with no gain recognition to the donor, with no unrelated use issues. The fact is, however, the courts have repeatedly held that these coins are "property other than money."

Dennis (talk|edits) said:

17 March 2014
The problem with gold coins, and the ones in question, is that they are authorized legal tender with a face value.

So? They are still tangible personal property. [1]

Ckenefick (talk|edits) said:

17 March 2014
And so is a dime then.

Dennis (talk|edits) said:

17 March 2014
Exactly. And a penny and a nickel and a quarter...♫ Tangible when you are holding them in your hand, intangible when you are holding them in a bank account. Settled law when it comes to estate taxation. You sell a dime for more than 10 cents you will be taxed at collectible rates.

Ckenefick (talk|edits) said:

17 March 2014
So then, your donation of a dime worth 15 cents (that you've held for over 1-year), since tangible personalty, will only produce a 10 cent tax deduction if the charity immediately sells the dime and doesn't put it to related use.

Ckenefick (talk|edits) said:

17 March 2014
By the way, 1001(b) [amount realized], makes no distinction between intangible money and tangible money:

The amount realized from the sale or other disposition of property shall be the sum of any money received plus the fair market value of the property (other than money) received.

Ckenefick (talk|edits) said:

17 March 2014
Also, 408(m) says, "Don't invest your IRA in collectibles," but there's a carve out:

For purposes of this subsection, the term “collectible” shall not include—

408(m)(3)(A)(A) any coin which is—

408(m)(3)(A)(i)(i) a gold coin described in paragraph (7), (8), (9) , or (10) of section 5112(a) of title 31, United States Code,

And, the stuff in 31 USC 5112 probably includes the coins described by the OP. So, by this definition, such a good coin wouldn't be a collectible...maybe wouldn't be "property other than money," leading one to conclude that it might be money.

Dennis (talk|edits) said:

17 March 2014
And, the stuff in 31 USC 5112 probably includes the coins described by the OP.

Bull...♫

By the way, 1001(b) [amount realized], makes no distinction between intangible money and tangible money

The distinction lies in the tax rate.

but there's a carve out:

Mot one that changes the definition of the coins as collectibles...♫

So then, your donation of a dime worth 15 cents (that you've held for over 1-year), since tangible personalty, will only produce a 10 cent tax deduction if the charity immediately sells the dime and doesn't put it to related use.

Exactly how the law is written.

If you don't care for the estate tax laws try the ones for §1031

PLR 8117053 -- exchange of bullion for kruggerands qualifies under 1031

Rev. Rul. 82-96 -- exchange of bullion for Canadian Maple Leafs qualifies

Ckenefick (talk|edits) said:

17 March 2014
Bull...♫

I'd bet a gold coin on it. DAJ hasn't told us what denomination, but he has told us they have no numismatic value, meaning that they're "newly" (if you will) minted...From 31 USC 5112(a)(9), for example, dealing with a $10.00 American Eagle:

A ten dollar gold coin that is 22.0 millimeters in diameter, weighs 8.483 grams, and contains one-fourth troy ounce of fine gold.

This is a bullion coin. Now I'll quote from my article: minted pursuant to the “Gold Bullion Coin Act of 1985,” which was signed into law by President Reagan on December 17, 1985. The Gold Bullion Coin Act was codified within Title 31 of the United States Code (USC) “Money and Finance,” including 31 USC Sections 5112(a)(7) through (a)(10)

(a)(7) is the $50 coin

(a)(8) is the $25 coin

(a)(9) is above, the $10 coin

(a)(10) is the $5 coin

So, more than likely, DAJ's coins are the ones described in 408(m).

The distinction lies in the tax rate.

You still have to define "money."

Not one that changes the definition of the coins as collectibles...♫

Understood. But the carve out, although it doesn't mean that much, at least in my mind, makes one wonder if the implication is that the carved out coins are, in fact, "money." I bring up 408 only because nowhere else, aside from Sec 613 (percentage depletion), will you find the word "Gold" in the IRC.

Exactly how the law is written.

Actually, the law isn't written, because money isn't defined anywhere.

Ckenefick (talk|edits) said:

17 March 2014
If you don't care for the estate tax laws

I can't say I don't care for them, I just don't find them to be relevant in the income tax area...although the income tax issue all started, pretty much, with an estate tax ruling (RR 78-360), wherein the circulation issue was first raised.

Ckenefick (talk|edits) said:

17 March 2014
Exactly how the law is written

Actually, I left out my basis in that dime, so not sure how you come to that conclusion anyway.

Ckenefick (talk|edits) said:

17 March 2014
Let me conclude by saying this:

I tend to think an American gold coin, legal tender, like the OP's gold coin, is more akin to an appreciated stock than a painting. It can be valued just as easily, you just weigh it instead of looking it up on a stock chart. If you really want my opinion, it sounds a like money, but that might be a stretch (I know, a legal tender U.S. coin being treated as money).

I do realize, however, that the case law, etc. on the income tax issue (realization) treats it as tangible personal property. This is clear. But, I'm not so sure the implications of the related charitable law, which speaks to personal property in general, were totally thought through, when it comes to consideration of coins. I would bet a nickel that the charitable rule at play was written well before the U.S. started minting coins again under Reagan...and well after FDR had everyone's gold confiscated in 1933 (although I haven't researched it). Anyway, DAJ has the facts, and he has the ruling on his side...he'll have to make the call...although the ruling doesn't appear to be set in stone.

Dennis (talk|edits) said:

17 March 2014
Dear, dear...you seem to have lost complete track of whatever point you've been trying to make.

Would you like to try again?

How about finding a source that thinks PLR 9225036 would be affirmed?

DAJCPA (talk|edits) said:

18 March 2014
My client says they are 1.0oz $50 American Eagles. Thus they appear to be USC Title 37 5112(a)(7) coins. He bought them strictly as a gold bullion investment, not as a collector.

Thank you both Chris and Dennis for your insight. I didn't mean to cause/create any rifts!

Ckenefick (talk|edits) said:

18 March 2014
Would you like to try again?

Yes, I'll just cut and paste from my above comments, since you're a little slow today.

This is what I started with:

Logically, the donation should be treated like a donation of appreciated stock...I'd treat it that way for deduction purposes

This is what I ended with:

I tend to think an American gold coin, legal tender, like the OP's gold coin, is more akin to an appreciated stock than a painting.

That's my opinion. Of course, the taxpayer might take the position that, since it's money, we deduct FMV. After all, that's what most people do when they write checks to charitable organizations. Of course, the word "money" isn't defined in the Tax Code...I made that point too, Dennis, but maybe you missed it. So, I pointed to the one place in the IRC when there's a relevant reference to Gold - Sec 408 - wherein the gold coins at issue (I'm pretty sure) were carved out as not being treated as a collectible. Implication being, maybe these coins are treated as money. Just an observation. Of course, you said, "bull," which just goes to show you didn't see the link between OP's coins and 408(m)...and you didn't fully understand the true nature of OP's coins. But, as I then admitted, even though taxpayer favorable - that carve out in 408(m) - I wouldn't bet the farm on it. Likewise, I wouldn't bet the farm on your "out of context" estate tax rulings, as I mentioned above.

How about finding a source that thinks PLR 9225036 would be affirmed?

How about finding a source that thinks the PLR *wouldn't* be affirmed?

You know, an actual ruling - or case - involving U.S. legal tender gold coins given as a donation. I'm afraid you will not find one, which leaves the issue unresolved. And, if it's unresolved, we look to other things that might give us hint as to the right answer in the charitable context. Part of it, I think, is the fact that the U.S. had been out of the gold minting business for quite some time before Reagan. And the law hasn't quite caught up to this new paradigm. As such, applying a strict "personal property" label to something like a gold coin might not be appropriate.

I myself don't think we should treat a dime as personal property. If we did, Dennis, we have a realization event every time there was inflation or deflation - you know, as purchasing power changes. Think about it. This is why a dime, if circulating, is not treated as "property other than money" under the tax code. It is treated as "money," despite what Dennis thinks.

Now, with all that said: I readily admit that, on the realization front, gold coins are treated as "property other than money." Call it personal property, if you will, but the cases haven't really gone that far. They've just said it's property other than money. In the realization area, the personal property distinction wasn't really relevant, all that was relevant was whether or not a realization event had occurred.

I simply do not believe that the a U.S. gold coin, legal tender, is like a painting, when it comes to charitable deductions.

Again, that is just my opinion.

Ckenefick (talk|edits) said:

18 March 2014
My client says they are 1.0oz $50 American Eagles. Thus they appear to be USC Title 37 5112(a)(7) coins. He bought them strictly as a gold bullion investment, not as a collector.

I knew they'd fit in there, hence my bet. Dennis says, "bull," however.

Anyway, these debates are good. And Dennis might actually win this one...but that won't stop me from arguing.

DAJCPA (talk|edits) said:

18 March 2014
This interests me:

Chris writes: So then, your donation of a dime worth 15 cents (that you've held for over 1-year), since tangible personalty, will only produce a 10 cent tax deduction if the charity immediately sells the dime and doesn't put it to related use.

Dennis writes: Exactly how the law is written.


Chris already brought this up, more or less, but I ask: What if Chris paid 15 cents for the aforementioned dime? Is his deduction still only 10 cents? Or, in this case is the dime now tangible property, not money, and he gets his basis, 15 cents, as a deduction.

Ckenefick (talk|edits) said:

18 March 2014
Let's pretend the guy paid 12 cents for dime and now, at least 1 year later, it's worth 15 cents. I think that's a more complete scenario.

For charitable purposes, if treated as "money," the deduction would be 10 cents. We go by face value. Money cannot appreciate or depreciate against itself. In order for value to rise and fall, there must be some other benchmark.

For charitable purposes, if treated as "property" (i.e. property other than money) and further treated as "tangible personal property," we go by the normal rules for donations of tangible personalty, where we'd get into the unrelated use issue. We have a basis of 12 cents and a value of 15 cents. I see a charitable deduction here for 12 cents. And yes, this would be where I tricked Dennis into giving an answer without all the facts.

Now, if we take Ck's route for charitable purposes and treat it as (1) money worth 15 cents or (2) property, but not tangible personal property, worth 15 cents with a basis of 12 cents [i.e. akin to appreciated stock held for the LT]...we have a deduction of 15 cents.

Dennis (talk|edits) said:

18 March 2014
The Canadian Maple Leaf is "money" It has a defined currency value. It qualifies for a 1031 exchange with gold bullion. End of story.

Ckenefick (talk|edits) said:

18 March 2014
Maybe you're getting mixed up, Dennis. From the RR:

Therefore, the Canadian Maple Leaf gold coin is property rather than money for purposes of section 1031(a) of the Code.

Not that it matters, because we have the "for purposes of" language in the ruling. Just like we have similar language in the 1031 reg:

Definition of “like-kind.” As used in section 1031(a), the words “like kind” have reference to the nature or character of the property and not to its grade or quality.

Going down the 1031 path will get us nowhere in this inquiry. We don't care what 1031 says. We'd like to know about Section 170.

Ckenefick (talk|edits) said:

18 March 2014
Obviously, if one side of a 1031 involves money, it would be cash consideration or boot. Again, not that it matters.

Dennis (talk|edits) said:

19 March 2014
Right...♫ For purpose of 1031. For purpose of 2001. For purpose of 2101. For purpose of 2501. And somehow you figure 170 is going to be different? You want your 12 cent dime to be money, put it in an account and add 10 cents to your balance. So long as it's in your pocket it's a collectible.

Ckenefick (talk|edits) said:

19 March 2014
These are newly minted coins. Legal Tender. Circulating, from what I can tell, even though the word has never been adequately defined. Argument can be made that they're "money" under the tax code, since case law brings up "circulating" as a critical distinction between "money" and "property other than money." Yes, case law didn't foresee the U.S. getting back into the Gold Minting business, and yes, the judges made this whole "circulating" thing up to begin with...and, in the first case dealing with these newly minted coins (William Ray Smith v. Commissioner, TC Memo 1998-148), the judge referred to them as "commemorative," which is completely wrong, seeing that the U.S. Mint doesn't even see it that way.

Of course, even if treated as money, IRS could say, "Fine, you get to deduct the face value." That's why I like the "akin to an appreciated stock" argument better. Dennis' points are taken, and again, he might very well win this one. Part of the problem, as I see it, and as noted a few times, is that we're dealing with a law (charitable contribution of tangible personalty) that came before the Gold Bullion Coin Act of 1985.

Okay, enough with the gold coins...I need help with that Preggers post...

Ckenefick (talk|edits) said:

19 March 2014
And somehow you figure 170 is going to be different?

Maybe. Why? Because (1) they're more like stock held for long term appreciation than they are like a painting [i.e. easy to value; the PLR does mention holding purpose, although I agree, the PLR isn't worth a ton] (2) plus, they're denominated, U.S. Legal Tender [a la regular coinage, which is treated as money] and (3) I'm not convinced the existing charitable rules contemplated the U.S. getting back into the gold minting business and (4) there's a carve-out in 408(m) and (4) the government touts them as investments and (5) if you turn one in to the Federal Reserve, you get face value only, indicative of money.

It doesn't really make a whole lot of sense why a stock gets favorable charitable treatment, but a U.S. legal tender gold coin wouldn't.

(Might also want to try paying your local property taxes with one...see how much credit they'll give you...or, just ask Mr. Klein (Crummey vs. Klein Indep. School Dist., 2008 WL 4441957 (5th Cir. 2008).

So, in a nutshell, even if we win on the "Ok, we'll treat it as money and not as property, and not as tangible personal property," we might lose on the deduction amount: we might only get face value.

So, that's all I know. I do wonder though, why a stock certificate is not treated as tangible personalty. You can certainly touch and feel the stock certificate. Maybe OP should drop his coins into an entity and donate the stock.

Dennis (talk|edits) said:

19 March 2014
1) they're more like stock held for long term appreciation than they are like a painting

You have seriously never heard of non-correlated investments?

In most places there is a sales tax added to the purchase of your 12 cent dime. Couldn't have anything to do with recognition of the fact that it's tangible personal property, could it?

Ckenefick (talk|edits) said:

19 March 2014
You keep focusing on "tangible personal property" in different contexts - estate tax, sales tax. I get it. You keep hanging on to the status quo, how it is under the existing rules...rules that came about before the U.S. decided to mint gold coins (again).

I just don't think that gold coins, minted by the United States, necessarily constitute "tangible personal property" for purposes of Section 170 of the Code. They certainly don't "for purposes of" 408(m) - and I wonder why? Maybe Congress wants you to "invest" your IRA dollars in U.S. gold coins.

There is a strong case to be made that these coins are not "property" and therefore, cannot be "tangible personal property." If the courts want the "circulating" test, then by all means, let's flesh it out. The mere fact that there are cases wherein people have used these coins to make asset acquisitions bear it out: That these coins are circulating. And if they're circulating, guess what: They constitute money under the courts' own test.

But, even if we win on that one, for purposes of 170, we have the problem of valuation: Face vs. actual/intrinsic. And I do realize that we might not win this one to begin with. Even though the courts constructed the "circulation" test, the minute they see it falls flat when the U.S. started minted coins again, they'll toss the test out the window and come up with a new one to twist the rules (yet again). But I get it. The twisting reflects reality.

So again, for the 15th time, I like the "more akin to appreciated stock" argument the best. What i really is is "appreciated money"...and we should be able to deduct the value of that. If the courts would like to call these coins "property other than money," for purposes of 170, then great. Maybe I would label it: "Property other than money that is not tangible personalty for purposes of Section 170 of the Code." I mean, hell, if the coin is tangible because you can touch, then so is a stock certificate or bond. Each evidences something else. The stock certificate evidences the Company you own. A coin evidences everything you could buy.

In most places there is a sales tax added to the purchase of your 12 cent dime. Couldn't have anything to do with recognition of the fact that it's tangible personal property, could it?

Interesting use of the word "most."

Dennis (talk|edits) said:

19 March 2014
There are also cited rules that came about after Canada decided to mint gold coins, and there is no way you can either make a currency distinction between US and Canadian coins or take the position that the ruling on Canadian coins would not apply to US coins (at least not without incurring the frivolous position penalty...♫).

If you want to see the fallacy of "more akin to appreciated stock" check out the treatment of a donation of units in a publicly traded ETF holding gold bullion...♫

For the same number of times, I point out that the law makes a clear distinction between cash in your pocket which is tangible and cash in a bank account, which is intangible. The law also (in all cited cases) makes a clear distinction between currency value and market value.

Ckenefick (talk|edits) said:

19 March 2014
If you guys are thinking, "Dennis seems to be focusing on the status quo and ignoring the fact that the U.S. has started minting gold coins again," you would be right.

and there is no way you can either make a currency distinction between US and Canadian coins

31 USC 5112 says the U.S. gold coins are legal tender as per 31 USC 5103. 31 USC 5103 specifically states that foreign coins are not considered legal tender in the U.S. It's pretty well settled that foreign currency is treated as personal property under the tax code.

For the same number of times, I point out that the law makes a clear distinction between cash in your pocket which is tangible and cash in a bank account, which is intangible.

Ok, Dennis. Then we'll put the coins in an "account" and transfer the account to charity. That settles the issue according your logic.

If you want to see the fallacy of "more akin to appreciated stock" check out the treatment of a donation of units in a publicly traded ETF holding gold bullion

Be glad too. Give me a cite that speaks specifically to U.S. gold coins minted under the Reagan act.

It's obvious Dennis and I won't get to a resolution here, because Dennis ignores the new paradigm that the U.S. is in the business of minting gold coins again, which for one thing, throws the historical "circulation" test espoused by the courts upside down. Dennis is acting like he telling us something new, which he's not. Everything he says is old and is already on the books. What is not on the books is a single case of someone donating U.S. legal tender, newly minted, circulating gold coins to a charity.

Dennis (talk|edits) said:

19 March 2014
The concept that foreign currency coins are not immediately equivalent to US currency eludes me. International trade would hardly work if they weren't. What exactly does "legal tender" have to do with the issue? Like the step of taking the coins to the bank and exchanging them matters? That you feel a deduction under §170 would be disallowed if it were made in foreign currency?

And again and again and again...the citation on Canadian Maple Leafs speaks specifically to the Regan coins. They are the equivalent of gold bullion under the law.

Ckenefick (talk|edits) said:

19 March 2014
What exactly does "legal tender" have to do with the issue?

If it's legal tender, it's money.

Dennis (talk|edits) said:

19 March 2014
Chris's problem is that apparently he wrote some kind of article and somehow managed not to hear the laughter.

Note the "like kind" language in the referenced letter from the charity. Code specific to exchanges, no?

Give me a cite that speaks specifically to U.S. gold coins minted under the Reagan act.

Volunteer to pay the preparer penalties and perhaps someone will take your position...♫

Ckenefick (talk|edits) said:

19 March 2014
Chris's problem is that apparently he wrote some kind of article and somehow managed not to hear the laughter.

Another foolish comment by Dennis. The article involved realization only and took no position on anything. It just fleshed out the history of the cases and the facts, with a few observations here and there. It was very neutral. But, if I actually had an opinion on it, it would be this: Using face value for realization purposes smells bad, so the courts made up a test to deny such treatment. Dennis of course knows nothing about this test, although it is the backbone to all the courts' decisions...which makes one wonder how the courts will change the test in light of the U.S. now minting coins again. Anyway, I get it. It smells bad, so the courts make up a test to deny the taxpayer. Fair enough. Taxpayer's should pay tax on the value of stuff they get. I don't dispute that and never have.

The article had nothing to do with OP's question about Sec 170. I'd be fine taking the position that the gold coins were cash, for 170 purposes, seeing that's what they are, under the USC. I'd also be fine treating these coins like stock. Throw the preparer penalty my way...but you better back it up with something other than, "you can touch and feel the coin." Your "check" is twenty times the size of my coin.

Nilodop (talk|edits) said:

19 March 2014
Your "check" is twenty times the size of my coin. Does size matter?:-}

Dennis (talk|edits) said:

19 March 2014
The courts made up a test?

Rev. Rul. 69-63 donation of coins not held primarily as a medium of exchange is a gift of tangible personal property.

Foreign currency is not "money". A ruling on the Canadian Maple Leaf does not apply to US minted gold coins Gold coins are more akin to stock than a publicly traded ETF holding bullion. When the charity in question calls the donation "like kind" property the statement has no meaning.

I think everyone but Kenefick can hear the laughter.

Ckenefick (talk|edits) said:

20 March 2014
Of course, Dennis fails to recognize and acknowledge that this RR pre-dates America's re-entry into the gold coin minting.

And, if we must go there, we should cite the relevant parts from the RR. First, here is what you wrote:

Rev. Rul. 69-63 donation of coins not held primarily as a medium of exchange is a gift of tangible personal property.

You conveniently left out of the parts about (1) the coins being rare and (2) the coins acquiring value as collector's items.

Here's the flush language from the RR:

Held, since the collection of rare coins was not held primarily as a medium of exchange but instead has acquired added value as collector's items, the collection is tangible personal property for purposes of section 170(f) of the Code

OP's coins, as OP states, had no numismatic value. Translation: They aren't rare. There's a ton of them out there. They didn't acquire any added value as "collector's items." They have value only because of their gold content. And note, the RR *didn't* say, "the coins can be felt and touched, so they are tangible personalty property."

Yes, I hear the laughter, Dennis. But I think everyone is laughing at you.

I'm also smart enough to know that the IRS might very well take your position on the matter, with respect to newly minted American Gold Eagles. (I've already said this). But, I'm also smart enough to know the issue is unresolved. And, I'm also smart enough to know that OP's client has a pretty good case to make some waves with this issue.

Dennis (talk|edits) said:

20 March 2014
You talk about the ruling predating and somehow can't recognize the extension and why it still applies. The meaning of "but instead" is clear. If there is value other than as a medium of exchange the coin is tangible personal property. And that is the position of every state that imposes a sales tax.

If the issue is unresolved it would be only because no-one wants to try your method and face the preparer penalties. Go find a charity that will take your position. This one certainly didn't.

The Regan era coins are collectibles. That is code specific. §408(m). The Regan era coins are tangible personal property that can included in the Estate of a Non-Resident Alien. The Regan era coins are tangible personal property subject to gift tax. The Regan era coins are like kind with gold bullion.

I'm also smart enough to know that OP's client has a pretty good case to make some waves with this issue.

And I'm sure you would submit the charity's letter as evidence...♫

Ckenefick (talk|edits) said:

20 March 2014
You talk about the ruling predating and somehow can't recognize the extension and why it still applies.

Apply it if you want...but it's about "rare coins" that have "acquired value as collector's items." That's not the OP's case. But if you want to apply it, go ahead. I guess we could say since OP's coins *aren't* all that, then OP's coins are not tangible personalty, for Section 170 purposes, per that RR.

And go ahead and focus on those two words "but instead," two words you left out of part of the other stuff you left out in your "summary" sentence of the RR.

Obviously, if the coins in the RR did not acquire any "collector's value," then the RR would have had to address that fact and would have been worded completely different. The coins in the RR did take on collector's value and this is why the RR made mention of it. What you're trying to do, Dennis, is apply the OP's facts of "non-rare coins with no collector's value" to an RR that involves "rare coins and collector's value." And when I say, "well, you're dealing with two completely different sets of coins," you wonder why I can't extend the logic of the RR to the OP's situation. You make no sense. You can't extend the logic b/c the RR logic applies to the specific coins involved in the ruling.

And that is the position of every state that imposes a sales tax.

Maybe, but we're not talking about sales tax. And you're only talking about those state that actually impose a tax.

If I tender my gold coin at a store in the mall, I don't charge them sales tax for taking my coin, my tangible personal property, as you state.

Go find a charity that will take your position.

Uhhh, OP's charity already has taken that position.

"Collectibles" is a term of art to designate something subject to a special 28% tax rate, or something that can't go in an IRA.

And, I've already told you what I think about your gift and estate tax references. Even a dime gets included in one's estate, based on it's value.

My writing gets easier, as you dig yourself into a deeper hole.

Ckenefick (talk|edits) said:

20 March 2014
And I'm sure you would submit the charity's letter as evidence...

Sure, if it has the value and the language about no goods/services received. Not a problem. So what if it says "like kind." Find me a charitable letter that actually has all the right words.

Dennis (talk|edits) said:

20 March 2014
Uhhh, OP's charity already has taken that position.

My position. Nobody is taking yours.

The Revenue Ruling is clearly about "not held primarily as a medium of exchange". It speaks to rare coins, because as you noted, but would rather forget, the ruling predates.

Sure we're not talking about sales tax...we're talking about tangible personal property on which sales tax is imposed...and all bodies of law seem to define coins as such. You keep ignoring your own §408 citation.

Ckenefick (talk|edits) said:

20 March 2014
It speaks to rare coins, because as you noted, but would rather forget, the ruling predates.

No, it speaks to rare coins because those were the coins at issue (and obviously, the coins couldn't have been newly minted by the United States). If your point is that the ruling is totally on point, to newly minted coins, and therefore, should be extended to newly minted coins, yet doesn't contemplate newly minted coins because there were no newly minted coins in existence at the time of the Ruling, then it's a safe bet the Ruling doesn't draw a conclusion on newly minted coins that are legal tender...but only on "rare" coins that existed at the time of the Ruling and that were the subject of the Ruling.

And read DAJ's fourth post about the charitable letter. Sounds a lot like the requirements for appreciated stock...expect for that phrase, "carries no numismatic value," which the Organization believes is a qualifier for an FMV-based donation. So, not sure why you think the charity is taking your position.

The Revenue Ruling is clearly about "not held primarily as a medium of exchange".

No it's not. If it was, it would have said, "The taxpayer did not hold the coins as a medium of exchange. Period." But if you would like it to be, its an interesting position by the IRS, because it flies in the face of your notion that if you can see it and touch it, and if it's subject to sales tax, gift tax and estate tax, it MUST be tangible personalty...regardless of holding purpose. Since when is "personalty" defined by "holding purpose?" Aaah, maybe the IRS thinks *this* type of "personalty" is different than *other* types of "personalty" so they apply a special rule to it. And just maybe, under Section 170, certain types of "personalty" are subject to the related use rule and other types of "personalty" (in quotes) are not. But then again, maybe the IRS is re-thinking its position here, and its position in the subsequent PLR, as a few places have noted. But it doesn't really matter. Neither the RR or PLR deal with recently minted U.S. Gold Coins, as I have told you many times. Until a ruling comes out, we just don't know, as I have also told you many times. Yet, you want to continue to extend taxpayer-favorable rulings to OP's client, and then argue that they don't say what they say...my writing gets easier and easier, Dennis.

And whose to say what OP's holding purpose was? It's money for crying out loud. Maybe his intent is to buy some land with it, like Tom Selgas did. Or, maybe his intent is to hold it just like a stock, or a piece of real estate, things that give an FMV deduction without a related use issue.

Sure we're not talking about sales tax

Okay, then stop talking about it.

You keep ignoring your own §408 citation.

Not sure how. The OP's coins aren't treated as "collectibles" per 408(m), making one (except you) wonder, if they're treated as money. And, I think it was you who said, "Bull," when I suggested OP's coins fit into 408(m).

Ckenefick (talk|edits) said:

20 March 2014
http://www.aicpa.org/publications/taxadviser/2013/january/pages/clinic-story-07.aspx

Might want to read this too, about how uber important state law characterization is with respect to 1031 exchanges...

Ckenefick (talk|edits) said:

20 March 2014
The Revenue Ruling is clearly about "not held primarily as a medium of exchange".

Then why does it say...

Held, since the collection of rare coins was not held primarily as a medium of exchange

Maybe that word "rare" is important, Dennis...seeing that OP's coins are clearly distinguishable as they are recently minted and are circulating and are legal tender...

DaveFogel (talk|edits) said:

20 March 2014
Ckenefick and Dennis, watching you debate over this is certainly entertaining, but I don’t think it’s been very helpful to the OP. I’d like to step in and try to simplify this matter.

The central question here is whether American Eagle gold bullion coins, having no numismatic value, donated to a charity, are tangible personal property for purposes of IRC §170(e)(1)(B) that limits the charitable contribution deduction to the donor’s cost basis.

Rev. Rul. 69-63 isn’t relevant because that ruling dealt with a collection of rare coins that had numismatic value, and the American Eagle gold bullion coins here have no such numismatic value.

PLR 9225036 is the only relevant guidance here. The IRS concluded that South African Krugerrand gold bullion coins were not personal property for purposes of IRC §170(a)(3).

As tax professionals, we are entitled to rely on a private letter ruling as substantial authority. See Treas. Reg. §1.6662-4(d)(3)(iii). Therefore, since PLR 9225036 concluded that gold bullion coins were not personal property for purposes of IRC §170(a)(3), we can safely take a position on a return that a client may claim FMV (not cost basis) for a donation of those coins.

Since the value of the coins is more than $5,000 and the donation is not based on the coins’ face amount but rather their precious metal value, the client must get a qualified appraisal. The client must also complete Form 8283 (including Section B) and attach it to the return. See IRC §170(f)(11) and Treas. Reg. §1.170A-13(c)(2).

Ckenefick (talk|edits) said:

20 March 2014
Thanks, Dave. Well said.

I hope the OP finds the debate helpful, however. Dennis points are more than well taken. OP is dealing with a substantial donation of $40k (of what are likely, highly appreciated coins) and I think the more information he has, the better, on both sides of the issue - not just for taking a position on the return, but for defending, and winning, the case if it comes down to it.

If we play this all the way out...all the way out to a point where the return gets examined...I can see the IRS taking Dennis' position. And that's where the nuances of this debate might be helpful to the OP...as I would hope the OP would want to put forth a solid case against the IRS, with the hopes of winning it, if it comes down to it. In other words, substantial authority is certainly nice, but it doesn't mean you're gonna win.

Dennis (talk|edits) said:

20 March 2014
General consensus is that PLR 9225036 was about to be reversed by another PLR that was not issued because the applicant died and that it is unlikely it would hold.

"However, the IRS apparently was ready to reverse its position in a later PLR that was withdrawn because the taxpayer died. In addition, the position described above is inconsistent with the reality that when sold the gain in Krugerrands (and other gold coins), gold bullion, and shares in ETFs that invest in gold bullion is taxed as if they are tangible personal property." [2]

"A second Kruggerand ruling submitted some nine months later, which was withdrawn because of the tax payer’s death, appeared to indicate that IRS had changed its mind." [3]

" However, the rational in this ruling is contrary to the GCM 33791 and has been criticized as potentially the wrong result" [4]


The best you might do with this argument is avoid preparer penalties.

Sec. 408(m)(2) -- collectible defined

(D) any stamp or coin

The exception found in (m)(3) is "For purposes of this subsection"

The language affirms the coin as a collectible and merely says it can be held in an IRA

I fail to see the logic in assuming the language "coins not held primarily as a medium of exchange" has relevance only to rare coins when that same language is widely used to apply to all precious metal coins. You might not care for State sales tax law but the consistent use of this language has to have meaning.

Ckenefick (talk|edits) said:

20 March 2014
The best you might do with this argument is avoid preparer penalties.

That's why I haven't been arguing it.

DAJCPA (talk|edits) said:

20 March 2014
I hope the OP finds the debate helpful, however. Dennis points are more than well taken. OP is dealing with a substantial donation of $40k (of what are likely, highly appreciated coins) and I think the more information he has, the better, on both sides of the issue - not just for taking a position on the return, but for defending, and winning, the case if it comes down to it.

Absolutely! Although Dave's post is concise and to the point, which is helpful (thank you, Dave), I have also found Chris's and Dennis's insights helpful as well. The more information one can obtain regarding an issue, the better. Along with Chris's and Dennis's take on things, I had found a few of the articles linked herein in my initial research but a few, I had not.

Thank you all for the input! I wish I had more time to give back to TA.

DaveFogel (talk|edits) said:

20 March 2014
I don’t think you’re going to find any relevant guidance on this issue other than the PLR. An article written by someone isn’t guidance; it’s someone’s opinion. An unreferenced PLR that was withdrawn and not published isn’t any help. GCM 33791 was issued in 1968, before the basis limitation rule of IRC §170(e)(3)(B) was enacted in the Tax Reform Act of 1969 (P.L. 91-172), so it’s no help. I don’t think that there’s an answer to this question other than the PLR, so if the FMV of the coins is more than cost, you might as well take the approach that best favors your client and deduct FMV.

Ckenefick (talk|edits) said:

20 March 2014
Totally agree. As usual, we are a bit ahead of our time here on TA. Shall we start a thread about *Bitcoin?*

Dennis (talk|edits) said:

21 March 2014
I would think closer to behind the eight ball, but I certainly don't disagree that the PLR can be relied on to avoid penalties. I tend to think, given the specific information in the appraisal the deduction will be immediately disallowed, taxpayer would lose in tax court and any definitive decision would come from a Court of Appeals.

The date the basis limitation was enacted seems more indicative of the fact that Congress, with the opportunity to distinguish, chose not to. Bear in mind the law relating to treatment of coins as tangible personal property has application outside of §170.

An unreferenced PLR that was withdrawn and not published isn’t any help. ? Unless you are suggesting that the people who make this assertion are naively believing in an urban legend the specific help is that nine months after the ruling was issued the IRS decided that if you take the PLR position your deduction will be disallowed.

Who knows? Maybe they've changed their mind. But the objections to the PLR are more than just "someone’s opinion." They are a lot of someone's opinion. And there do not seem to be any opinions supporting,

DaveFogel (talk|edits) said:

21 March 2014
nine months after the ruling was issued the IRS decided that if you take the PLR position your deduction will be disallowed.

And your proof of this is what? A statement by someone who authored an article? In my opinion, that's no proof at all.

Mscash (talk|edits) said:

21 March 2014
I'm going to go back and rewrite the original question: If you take US gold coinss with no significant numismatic value and melt them down into gold ingots and make a charitable donation of the ingots what value would you take as a deduction.

Dennis (talk|edits) said:

21 March 2014
In my opinion, that's no proof at all.

Then you are categorically calling the people who make this assertion liars?

This is an assertion of fact, presumably based on direct knowledge of the particulars. If you take the position it is in error, the obligation to show otherwise is on you. So far you have presented nothing.

DaveFogel (talk|edits) said:

21 March 2014
So far you have presented nothing.

I have the PLR to rely upon. You want to take the opposite position, but you have nothing but hearsay to rely upon.

Dennis (talk|edits) said:

21 March 2014
OK. Now Fogel states categorically that the people who say the PLR would have been reversed are just repeating what someone else told them and in actuality have no direct knowledge. He offers no evidence to support this position and apparently he seems to think that OP should be comfortable walking into Tax Court with nothing but the language of the PLR.

That, by the way is my position. If that's all you've got you are going to lose.

Sure would be nice, by the way,if you could find some kind of opinion supporting the logic of the PLR. I couldn't.

Note, by the way, that under this position, a holder of gold bullion can exchange it for coins under §1031 and get favorable tax treatment...♫

Ckenefick (talk|edits) said:

22 March 2014
The ruling doesn't speak to Sec 1031. On the realization front, which would include 1031 in my view, Section 61 is broad and easy. If I do work for a client and get paid with a Koala Bear, a car, gold coins, a piano, a house, a computer, or whatever, it's taxable. The property type doesn't matter. What matters is the value of the property.

But, the minute we move into Sec 170, the property type does matter. Holding purpose might matter too. Holding period might matter as well. Stock, real estate, inventory, taxidermy property, patents, partial interests, self-created, etc. the list goes on.

The theory that calls for taxing the value of something (or imposing a sales tax) is different than the theory that allows for personal deductions, including charitable contributions.

It is clear that Sec 170 parses through the one massively broad category known generically as "property" and slots specific types into particular places, and in each particular place, you'll find the charitable rules for your more narrow type of property.

I myself don't think the parsing, which is clearly going on in Sec 170, absolutely contemplates all types of property, especially in light of the U.S. Government getting back into the gold minting business. As such, those definitions and categorizations we use for other purposes of the Code, like realization, shouldn't necessarily be extended to Sec 170 with no questions asked. Sure, it would be easy to do that, but I'm not so sure its appropriate.

Further, coins bear similarities to money and also to property other than money. So, given the current state of Sec 170, I'm not so sure we'll be able to easily "slot" our coin into a particular genre of property. It is obvious that the IRS has had some trouble with it too.

Dennis (talk|edits) said:

22 March 2014
Ah...so soon you forget, As cited above...

PLR 8117053 -- exchange of bullion for kruggerands qualifies under 1031

Rev. Rul. 82-96 -- exchange of bullion for Canadian Maple Leafs qualifies

But then, when you agreed with Fogel you didn't seem to notice that he dismissed all of your positions as irrelevant...♫

Note the language in the ruling.

"Because the Canadian Maple Leaf gold coins are bought and sold for their gold content, they are bullion ­type coins. Therefore, the nature and character of the gold bullion and the Canadian Maple Leaf gold coins are the same, and they qualify as "like kind" property as that term is used in section 1.1031(a)-1(b) of the regula­tions."

Still, its nice to see the ludicrous nature off my example woke you up.

Ckenefick (talk|edits) said:

22 March 2014
Your example didn't wake me up. Your example keeps in line with the errant path that you continue to go down, applying "realization" characterizations and definitions to a deduction setting. All along, I've said your 1031 path was misguided...because it is. As is your sales tax path, your estate tax path and your gift tax path.

But then, when you agreed with Fogel you didn't seem to notice that he dismissed all of your positions as irrelevant

If you actually read what Dave wrote, he was speaking about "guidance"...as in cases, rulings, and the like. Obviously, an author's opinion in an article isn't authoritative "guidance." That was his point. In addition, Dave was speaking to DAJ's comment, which immediately preceding his:

I had found a few of the articles linked herein

My article wasn't linked herein.

Ckenefick (talk|edits) said:

22 March 2014
We have Congressional intent. Then comes the law. Then come the Regs. Dennis must think Congress and the Treasury are both clairvoyant. That what they wrote contemplated a very specific type of "property" that didn't exist when Congressional intent was manifested, when the law was written and when the Regs were written.

Dave Fogel said it best:

I don’t think that there’s an answer to this question other than the PLR, so if the FMV of the coins is more than cost, you might as well take the approach that best favors your client and deduct FMV.

But Dennis probably said it right too:

taxpayer would lose in tax court and any definitive decision would come from a Court of Appeals

Dennis (talk|edits) said:

22 March 2014
Ah. A completely closed mind. Your position then is that my example stands.

A taxpayer holding gold bullion exchanges it for bullion coins under §1031. He can then donate the same value but get favorable tax treatment under the PLR. Makes no sense to me, but...♫

Ckenefick (talk|edits) said:

22 March 2014
My mind is closed from the standpoint that I do not believe we should always apply old paradigms to new issues. Things evolve and things change. New interpretations abound. New asset classes arise. Trying to apply realization concepts and pre-dated Regs to something as novel as a newly minted U.S. gold coin, a new asset class, might not be suitable.

I think we can do so with a great many things. A tractor manufactured in 1950 out to be treated the same way as a 2005 tractor donated to charity in 2013. I think the Regs adequately address both tractors. But I don't think the Regs contemplated newly minted, U.S. gold coins.

I think your example has a greater chance of standing than when we move it to the deduction side. On the realization side, the coins are treated as "property other than money." Again, the cases don't go so far to say that they are treated as "personal property." But that's only because the cases didn't need to.

I have no problem with a taxing a 1031 exchange that involves coins. But I don't think that it's all that relevant in the donation context.

So, I would say that I have a pretty open mind. Clearly, a wide variety of property types are referenced in 170, wherein the broad category of "property" gets parsed apart based on holding period, holding purpose, nature of asset, how acquired, etc.

Consider a stock held long-term. Someone gives it to me for services rendered. I report the value as income (realization).

Let's say I hold a stock that I've held over a year. I dispose of it via sale, I have a gain to report (realization).

I donate it to charity, I have no gain to report. To boot, I can deduct the FMV.

Different rules depending on the situation. If we applied the realization rule (stock received for services rendered or stock sold), to the charitable donation situation, I'd have gain to report and an offsetting cash contribution. No net deduction.

Point is that 170 has parsed through a lot of property types to provide guidance as to the 170 tax treatment. But 170 falls short in the "personal property" arena. I don't think existing (authoritative) guidance adequately address the gold coin. I think more parsing is needed. And a judge might just be the one to do it.

Also - check me on this - but I think that in determining "personal property" for 170 purposes, we'd go by the Sec 48 ITC rules. If so, that might bolster my position, maybe...It would be ludicrous to think that corp could convert cash to gold coins and take an ITC on the coins, only because they were later spent by the business...on anything. If I'm right on the ITC, and I'm not saying I am, it's another example of guidance not contemplating a new asset class.

Dennis (talk|edits) said:

22 March 2014
You persist in missing my point. You take the position that there is no problem treating bullion and coins differently for purpose of §170. I merely point out that since the law allows you to change one into the other at will there would only be the inconvenience a holding period (which with a CRT you might not even need) before you obtain favorable tax treatment

Ckenefick (talk|edits) said:

22 March 2014
Ok, tell me your point again then...I'm thinking that, no matter how long the taxpayer holds the coins, if donated to charity - and if treated as personal property for 170 purposes - the charity has to put the coins to a use related to its exempt purpose. In OP's case, I think we fail the test b/c coins will be immediately sold. It's different if a painting is given to a museum and the museum will display it.

...what am I missing?

Dennis (talk|edits) said:

22 March 2014
What you are missing is that your position allows the transfer of gold bullion into a CRT with favorable tax treatment if the taxpayer takes the intermediate step of completing a §1031 exchange into bullion coins. This is not meant as disagreement, merely a comment. For reference, the unfavorable tax treatment can be found in Reg. 1.170A-5

Ckenefick (talk|edits) said:

22 March 2014
Gotcha. But if the 1031 exchange of bullion into coins is taxable, wouldn't the favorable tax treatment, on the donation, be offset by the unfavorable gain recognition on the 1031?

Dennis (talk|edits) said:

22 March 2014
Why would you think the exchange is taxable? The Revenue Ruling (and the PLR) both say qualifying exchange.

Ckenefick (talk|edits) said:

22 March 2014
Gotcha. Point is taken. I'm just thinking that something's gotta give somewhere to align all of this. But, as things stand now, you're right.

It makes me think of Sec 121 and the games that used to be played wherein taxpayer would exchange, say, investment land, for a rental property, then later convert the rental into a primary residence, and then sell the primary residence tax free under Sec 121. Basically, the guy sold his land on a tax-free basis. Those were the good old days. Hence the advent of Sec 121(d)(10)...and the start of the bad new days.

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