Precious metals are, well, precious. Gold, silver, and even historic coins are some of the oldest representations of wealth that currently holds value in the world today. While gold, silver, and coins come in all shapes and sizes, extensive collections or large individual pieces can warrant huge cash sales to the right buyer.
Knowing this, investors with large reserves of precious metals will likely encounter a huge capital gain once the collection is sold. Although this is certainly exciting, it often becomes a little less so once capital gains taxes are paid on the sale of gold, silver, or numismatic coins.
Thankfully, modern IRS codes allow for large private property sales to defer capital gains tax with a 1031 exchange. In a 1031 exchange, a new property is purchased with the proceeds of the sale, so that investors essentially “trade” their assets, rather than pay capital gains taxes.
In this quick guide, we will outline the steps to 1031 exchange gold, silver, or numismatic coins. With this, the reinvent potential is limitless, and we will showcase mineral rights and royalties as one of the best possible private property purchases.
How to Sell Your Gold, Silver, or Numismatic Coins
Thanks to its value and history, there is essentially an unlimited number of ways to sell precious metals in today’s open market. From online sales to the pawnshop down the street, nearly everyone knows that gold, silver, and coins can be a strong investment that will hold its value for potential resellers.
With this said, legitimate sales must be completed with proper paperwork if you are hoping to utilize a 1031 exchange. While this is somewhat obvious, it is important to remember that legal sales to legitimate sellers are going to be the best way to maximize the sale of gold, silver, or numismatic coins.
Determining the Value of Your Gold, Silver, or Numismatic Coins
Everyone knows gold, silver, and coins are valuable, but how valuable? While numismatic coins are generally valued far and beyond their original face value, first-time sellers may have a difficult time determining the approximate value of newly inherited or acquired precious metal products.
Gold, silver, and numismatic coins are generally valued by the following considerations:
- Type of metal and its current market value
- Percentage of precious metal within assets
- Size, quantity, and weight of the collection
- Current asset conditions
- Number of previous owners
- And more
While most gold, silver, and numismatic coin sales are to private investors and entities, precious metal sales also have the opportunity for a few unique market positions. Beyond individuals, companies, governments, and even museums may be interested in acquiring gold, silver, or numismatic coins.
Taxes Paid on the Selling Gold, Silver, and Numismatic Coins
In legitimate sales, the IRS classifies gold, silver, or numismatic coins to be “collectibles.” With this in mind, considerable taxes are paid whenever precious metals are sold. Although the rates are variable depending on your location, the following may be paid on the sale of gold, silver, or numismatic coins:
- Capital Gains Taxes
- Sales Taxes
- Local Taxes
- Federal Income Taxes
- And More
When considering a collectible, taxpayers do not get the benefit of long-term capital gains tax rates. Instead, the sale of gold, silver, or numismatic coins is likely to coincide with a capital gains tax rate of up to 28% of the total bill of sale. Knowing this, the difference of capital gains taxes with a 1031 exchange is becoming increasingly common among both new and experienced investors.
1031 Exchange Gold, Silver & Numismatic Coins
1031 exchange gold, silver, or numismatic coins can be used to avoid every penny of capital gains taxed if taxpayers choose to invest the sale into a new asset of equal or greater value. While partial fees can be deferred with a property of lesser value, this is less common than investments that allow taxpayers to stretch their capital as much as possible.
Gold, Silver & Numismatic Coins Like-Kind Properties
The sale of gold, silver, or numismatic coins presents the opportunity to reinvest in a large number of different personal properties with a 1031 exchange. While the true definition of “like-kind” properties is quite loose, the IRS allows the following to be exchanged for gold, silver, and numismatic coins:
- Mineral rights and royalties
- Cars and other collectibles
- Homes and apartments
- Office buildings
- Convenience stores
- Trailer parks
- And more
Timeline to 1031 Exchange Gold, Silver & Numismatic Coins
After the asset is sold, taxpayers have exactly 180 days to replace gold, silver, or numismatic coins in a legal 1031 exchange. While this offers a grace period of essentially six months, at least one new property must be identified within 45 days of the sale.
Here, deadlines must be met alongside the necessary paperwork to legitimize a 1031 exchange. With this, many investors choose to work with a 1031 exchange intermediary to ensure the entire process is as smooth as possible. Beyond this, industry-specific experts are also available to assist in property identification to maximize your investment.
For additional requirements, please see our 1031 Exchange Rules and Requirements Page.
What to 1031 Exchange Gold, Silver & Numismatic Coins For
While private property owners can choose to invest in virtually anything with a 1031 exchange, mineral rights present a unique opportunity for taxpayers within the United States. With mineral rights, also known as subsurface rights, the property can be leased to oil and gas companies to explore, extract, and sell natural resources such as oil, gas, coal, or more. In doing so, mineral rights owners can receive monthly mineral royalty payments in compensation for their participation.
In conclusion, 1031 exchanges are one of the best ways to maximize the sale of gold, silver, or numismatic coins. With each dollar of capital gains taxes saved, reinvestment can go further into a new private property. Today, few investments are available that are quite like mineral rights, which can serve to become a profitable income stream or high value resell in a world of growing energy demand.