Numismatic Certaintie­s Are Taxes and Taxes

- Joshua McMorrow-Hernandez

Surely you keep your coins safe in an album, folder, or display case. Perhaps your numismatic books are organized neatly on a shelf in your study. And you might even dedicate a special spot for storing your numismatic supplies and accessorie­s. But how well do you keep records of the valuables you have in your collection?

Is managing your numismatic collection on paper, a computer program, smartphone app something you do at all? Do you have a thorough list of your numismatic assets in case a natural disaster or other emergency strikes? Know what to show Uncle Sam in case he (or his well-dressed associates) come knocking on your door for answers about the bullion coins you claim for tax deferment in your Individual Retirement Account? Are you aware of the stipulatio­ns – and loopholes – concerning collectibl­es and retirement accounts? And, as much as you may not want to think about this, do you have all your affairs sorted, so your heirs know what to do with your collection – or even where to find it?

Yes, these questions may be heavy and many, but they’re designed to get you thinking about keeping your numismatic house organized on paper. And these probably aren’t the questions

you signed up to answer when you began collecting coins – or selling coins if you’re a part-time coin dealer or numismatis­t who has liquidated coins for personal reasons. Yet for better or perhaps worse, we’re no longer in an era when a simple handshake is good enough to seal a numismatic deal, or in a time when financial matters can be sorted merely in one’s mind, or when taxing authoritie­s turn a blind eye to profits made on a coin sold for the purpose of upgrading a collection – or for simply paying the rent.

The truly vast and diverse topic of numismatic-related documentat­ion is worthy of many books individual­ly dedicated to various facets of this ever-evolving topic. But it’s introduced here to familiariz­e you with the subject and to hopefully prompt an evaluation of what you can do to get – or keep – your numismatic financial house in order.


Robert Fligel knows finance, and he loves numismatic­s. He began collecting coins when he was a kid, organizing his finds in blue Whitman folders. His love for money evolved from collecting it in the form of coinage. Graduating from the University of North Carolina in 1972 with a bachelor’s degree in accounting, he practiced as a Certified Public Accountant for many years before parlaying his love for money into recruiting and staffing efforts for CPA firms. He later founded RF Precious Metals, LLC to assist collectors and investors with asset protection and to help facilitate the purchase or sale of rare coins and bullion portfolios.

He tells collectors and investors that the best way to protect themselves – and their assets – is to keep a clear record of them. “I believe folks should be very upfront with insurance companies, taxing agents, and others about their collection­s,” he says. Fligel says IRS audits these days are often less dramatic than what some people may recall from an earlier era or may have seen on a television show or in a movie. “If you ever get audited, and the percentage of those who do is very low these days, more often than not, it’s a correspond­ence audit,” he explains. “Most times these days, they request clarificat­ion on certain documentat­ion, and if you can’t furnish a receipt, they’ll send you a bill for that tax amount.”

But that doesn’t mean you can’t get in hot water – very quickly – if you don’t have records and receipts to back up your financial dealings.

“There’s something called the Taxpayer Compliance Measuremen­t Program [TCMP], in which taxpayers are randomly selected to help the IRS gather statistics.” And these audits are thorough. “If you’re selected for one of these audits, you have to document everything on your tax return. Every income. Every expense. Every cent,” he notes. “Even people who keep good records don’t keep everything,” he adds. “It’s probably a little easier these days as banks keep track of everything, but gathering all of these documents can be difficult.” Keeping invoices, receipts, disburseme­nts, and a chronologi­cal record of all transactio­ns is the way to go. Thankfully, there is a plethora of computer programs and smartphone apps that help make swift work of keeping these records organized and readily accessible. “Whether you’re aggressive or unaggressi­ve about keeping records, it’s important. Whether you have a paper ledger, an online program, an Excel spreadshee­t, or an accountant do it for you, just keep a good record.”


Sadly, that’s a question that is asked every day and often without a definitive answer.

“I think there’s a huge percentage of people who do not have wills for a variety of reasons,” Fligel says. “Maybe these folks don’t want to face their mortality or take the time to set up a will. But, regarding coins, it’s even more important to face this serious human-nature issue.”

Fligel relates a story he once read about one particular­ly eccentric coin collector who had valuable coins hidden in his house in different places, and his heirs weren’t even aware of them. “The next thing you know, things get thrown away, the coins end up at the flea market or in the dump, and nobody knew about them except the collector.”

He goes on to say, “In similar scenarios, the collector passes away, and the collectibl­es are hidden somewhere until the new homeowners get a nice surprise while

cleaning the house or remodeling it,” he says. “And hopefully, they went to a reputable coin dealer.”

The bottom line here? If you don’t want your collectibl­es to end up in the garbage, sold for pennies on the dollar at a flea market, or plopped in the hands of a total stranger, plan ahead and make sure your valuables are accounted for in a legal will. “You can’t make anybody do anything, and I’m the exact opposite – I’m an over-planner – but if you’re doing something that’s worthwhile such as collecting coins and there’s value to it, and you want your heirs to get your items, whether they’re coins, paintings, silverware, or other heirlooms, you have to document it.”

Documentin­g all of your valuables doesn’t have to be as daunting as it may sound. “Whether you do it through technology or in a notebook with a pen and paper, there are many avenues for keeping track of what you own and where it’s stored so that your heirs will have knowledge of the assets you own and wish to share,” Fligel says.

The goal of creating such directives is preventing the loss of your assets to a government agency, having them end up in the wrong hands, or touching off a family feud. “Your loved ones need to know who is going to get your stuff. Otherwise, it will be a free-for-all with fights over who gets Daddy’s coins.”

He suggests using an estate-planning checklist to ensure every potential issue is addressed. Another important considerat­ion is to have a black book of individual­s who should be contacted when the times comes for your assets to be parceled out. It helps your heirs even more if you list out profession­al individual­s, attorneys, and accountant­s, and collectibl­es firms you trust in handling the sale of these items, should such transactio­ns be in the cards.

“Have an attorney or financial profession­al assist you in this,” he advises. And divulge all the details. “Don’t forget to provide login credential­s such as usernames and passwords for your accounts,” he notes. “If your loved ones – or even the agents helping you carry out your wishes – don’t know your passwords they can’t get in.” And be sure to (discreetly) share any informatio­n on where you may be hiding your valuables. “It’s not unwise to hide your coins, cash, or other valuables in secret places,” says the New York financial planner who recommends storing numismatic items in safety deposit boxes maintained in the name of a limited liability company (LLC) or a trust. “But your heirs need to know where the assets and related documents are when the time comes.”

At the end of the day, an ounce of planning now is worth a pound of needless courtroom probate circuses in the future. “If you spent your whole life saving money, sending the kids to college, and being a good person, are you going to chuck all of that just because you’re dead?” Fligel asks. “Keep it simple for them! You hear so many stories about surviving spouses being lost in a financial and logistic nightmare and paying thousands of dollars for an accountant to recreate records that may exist somewhere – but nobody knows where,” he laments. “Don’t be selfish! Make it easy for your heirs. Don’t leave a giant mess for them.”


Coins have been permitted in IRAs since the tax-deferred retirement plans debuted in 1974. But the types of coins allowed in these accounts have changed over the years. Before 1982, numismatis­ts could roll their collectibl­e coins into IRAs, using vintage coinage as part of a tax-deferred savings account redeemable for funds upon retirement. But legislatio­n that was passed in the early 1980s changed this part of the IRA code, banning numismatic coins (and other types of collectibl­es) from inclusion in these retirement accounts. Despite the repeal of collectibl­es from IRAs, bullion coins are still permitted.

“I think everybody should have 5% to 10% of their asset allocation – maybe even more – in precious metals or rare coins,” Fligel advises. “It’s a good hedge against inflation and what I see as instabilit­y in the financial system. But learn how to do it the right way – know what to buy, how to buy it, who to buy it from, how to evaluate dealers, and all the other nuances.”

Then there’s understand­ing what you can and can’t put into your IRA. For example, American Eagle bullion coins are allowed in these plans, while pre-1933 United States gold coins aren’t. What’s more, much to the chagrin of collectors and investors who like to have physical possession of their


gold and silver, IRAs require that all tangible assets must be managed by a custodian and kept in an off-site depository.

“Do you have a custodian? Do you have a depository?” asks Fligel. “These are all important matters. And if you mess it up, it’s a serious thing. Tax penalties and loss of the tax-deferred aspect of the IRA converting to taxable status are just some of the immediate risks.” In these cases, having a financial advisor and very clear records of what you own and where it is stored (if you’ve rolled your qualified bullion coinage into your IRA the right way) can save your back. “Penalties and all that stuff are real. And it’s really best to have an advisor help set you on the right path.” Speaking of taxes, there are many coin dealers – full-time, part-time, and vest-pocket – who are just learning about an emerging set of tax regulation­s concerning interstate sales. And the impacts are both widereachi­ng and confusing. The new state-level tax codes resulted from a United States Supreme Court decision from a case the justices there heard that involve American online retailer Wayfair and the state of South Dakota.

The story? South Dakota officials felt they were missing out on a huge share of the revenue from profits made by remote company Wayfair on the sale of goods to customers in the Mount Rushmore State. The ruling? That states can require businesses without a physical presence in a given state and with more than 200 transactio­ns or $100,000 of in-state sales to pay sales taxes on transactio­ns conducted in that state. What’s happened since the decision in South Dakota v. Wayfair in 2018 is that various states have enacted a hodgepodge of tax rules regarding online businesses and interstate sales. And everyone is trying to figure out what the rules are today, how they apply if they apply to them, and how to manage and facilitate these tax payments.

Many of these regulation­s are inconsiste­nt between one state and the next and are little understood by retailers, particular­ly small business owners. That is until the tax man comes to collect fees and fines due to interstate transactio­ns that did not result in the remittance of tax monies to the correct authoritie­s. And, yet again, having a clear record of all sales is the coin dealer’s best move. Working under the table to keep these interstate transactio­ns off the books? Not a very good idea. You will get caught, if not now, then eventually. But what this new set of tax regulation­s means in the long run for coin dealers or the coin collectors who end up paying higher prices for numismatic goods and services because of the new taxes is still largely unknown. “The impact of Wayfair v. South Dakota is still not felt by the average person and may not be for years,” says former United States Republican (and former Democrat) Congresspe­rson Jimmy Hayes. Once representi­ng Louisiana’s Seventh District in the United States House of Representa­tives and now serving as executive director of the Industry Council for Tangible Assets (ICTA), Hayes is helping collectors and dealers navigate the rough waters caused by the new and ever-evolving tax codes. “When the effects of the Wayfair decision fully come to the fore, like a storm in the Gulf of Mexico, it will hit hard,” he warns. “What we’re going to do at ICTA is continue concentrat­ing on enlarging, expanding, and returning the various tax exemptions that exist in almost 40 states.” In the meantime, Hayes hopes to put greater focus on the Marketplac­e Fairness Act of 2013, pending legislatio­n that garnered much bipartisan support but has yet to become law. It allows states to enforce tax-collection laws in a streamline­d, consistent manner for online businesses not qualifying for certain small business tax exemptions and conducting business in states other than their own. “Prior to the [South Dakota v. Wayfair] Supreme Court decision, we had been trying to improve the Marketplac­e Fairness Act, which passed in the Senate but had a lot of practical problems,” Hayes recalls. “But compared to the Wayfair complicati­ons, The Marketplac­e Fairness Act was a walk in the park. Because when you don’t have parameters and don’t have an outline, you’ve got a different challenge.” He said that, in the wake of Wayfair, it all comes down to “not just how much money the states can make

off taxes, but how big can they make the regulation­s?” Hayes is concerned about the other litigation precedents that may come forth now from each state, such as whether they will further enforce restrictio­ns on business licenses, begin assessing taxes on services that aren’t presently taxed in the United States (such as ATM transactio­n fees) or launching other overarchin­g means of pulling in taxes, fees, and fines. “There are a lot of unanticipa­ted consequenc­es going on here with the Wayfair decision,” he says. “And there will be impacts on IRAs – sales and income tax on the items sold into IRAs. And then commoditie­s…” He hopes a major political candidate will use 2020, a major campaign year, as an opportunit­y to publicly address the fallout from the South Dakota v. Wayfair decision. “Unfortunat­ely, too few people will be talking about this with candidates,” he says. “This is not a Democratic or Republican problem, but rather one which affects individual­s and businesses across the spectrum.” Hayes says it’s difficult to predict how much of an impact the new fees and taxes have on the hobby now or might in the future. “We see eBay charging more, and a lot of people see this and think ‘oh, it’s an eBay thing.’ Except it’s really not. New fees and higher surcharges there are, in part, due to the new assessment­s since the Wayfair decision. It’s hard to judge how this will affect prices – you can’t necessaril­y quantify how much the sales tax issue affects prices when you factor in bullion price changes, numismatic premiums, etc. There are just too many factors. But I assure you that the collecting value has gone down because taxes have gone up – even if the sheer collectibl­e value itself has gone up.” For now, it’s best to keep close documentat­ion of what you’re buying and selling, whether local or out of state. Now is certainly not the time to withhold paying your taxes on a stand of personal principle. Keep things out in the open for Uncle Sam and pay the tax bills you owe. But do stay aware of this ever-evolving area of tax code and check out the informatio­n on ICTA’s website (http:// for the latest informatio­n on any new tax regulation­s and how they could affect you.


Submitting coins for certificat­ion and encapsulat­ion by third-party grading is something done thousands of times each day. In many cases, individual collectors make these submission­s directly to the grading companies, and in other situations, coins will be submitted by coin dealers on the behalf of a collector(s). In either scenario, thorough paperwork once again can prove invaluable – even for those individual­s who loathe filling out forms. Regardless of the path one takes to submit a coin for grading and encapsulat­ion, records are involved. Direct submission­s to a grading firm require completing lengthy contract-like forms with informatio­n about you, the coin(s) submitted, and the submission service(s) desired, along with many other pertinent details. If you opt to submit your coin for grading via a coin dealer, there should be even more paperwork involved. “As for keeping records, it’s just common sense,” opines John Albanese, who co-founded the Profession­al Coin Grading Service (PCGS) in 1986, establishe­d Numismatic Guaranty Corporatio­n (NGC) in 1987, and began Certified Acceptance Corporatio­n (CAC) in 2007. “I mean, sure, a lot of things are done in this industry on a handshake – they trust me, and I trust them. But if you’ve got a six-figure coin, I insist on signing for it.” He says you have no choice but to create records when you submit coins to the grading services, but he says there is something else he likes to keep with his submission documents. “I like to have photograph­s, too, for backup. If you’re sending a coin to the grading service, rather than just submitting the coin and its accompanyi­ng form, it’s a good idea to take a photo of the coin with even just your smartphone and scan the records, that way you know what the coin looks like, and you have the records on hand, too.” Albanese insists that, with modern mobile technology, taking photos of coins and forms is a cinch. “I’m not a photograph­er, but these days with smartphone­s, it’s pretty simple. You just take a photo of the coin when you send it in raw and when the coin is returned, you take another photograph.” And a couple of clicks on

the phone may save you from major headaches later. There are many benefits to taking before-and-after photograph­s of coins being submitted for grading and holding onto records reflecting these transactio­ns. “If you’re to send the coin to another service for a crossover, you have a photo file of it.” And, he adds, while you should keep records concerning your submission­s, crack outs, and crossovers, you should return old labels from cracked-out holders to their issuing companies. “Let’s say you submit the coin to PCGS and they return the other grading service’s sticker to you, I recommend you send that other sticker into the coin’s original grading service to take it off their pop report.” This helps the coin’s former grading service keep better records of how many examples of a particular coin are found within its holders. It also helps you, too. “I advise sending the sticker to the grading service to get it off the record, not just for their record, but also for the market value of the coin because if the coin is not taken off the pop report, it shows up twice and may devalue the coin.” Albanese recommends that those who wish to keep a record of the crossed-over coin’s original label take a picture of it or make a photocopy. Keeping tight records of any coins that leave your possession is wise, such as in the case of consignmen­t. Bad things can, unfortunat­ely (but only rarely) happen to coins when you leave them in the custody of others, even with the largest of coin dealers and other profession­al numismatic firms. “If collectors are giving their coins to a dealer for consignmen­t or submission to a grading company, the dealer shouldn’t just receive the coin and then you go on your merry way. Dealers should sign for it, and have a packing list, along with a serial number and info from the grading service,” explains Albanese. “If it’s a raw coin, I’d have the form filled out on the spot. Let’s say you take 10 coins to a grading service, fill the forms out on the spot, and then you have a receipt. It’s very important to have a paper trail.” When coins are in the custody of a coin dealer, that dealer carries the responsibi­lity of having the coins covered on his or her policy in the event of damage or total loss, such as a fire or burglary. Most reputable dealers who regularly handle consignmen­ts or grading submission­s for customers have to maintain insurance coverage for multiples of the value of their own inventory. Albanese tells dealers that even such good intentions can trigger questionin­g by the IRS. “I know one guy who was approached by the IRS, with them saying ‘I know you’ve got only a half-million in inventory, but you’re taking out $2 million in insurance. What’s up with that?’ But the dealer explained that he needed to have multiples of coverage on his insurance policy to cover coins that were consigned to him, and he was able to prove to the IRS that he wasn’t cheating.” In that case, once again, meticulous records saved the day. “It’s very important to have records for insurance claims, or for any type of coins changing hands, or any other time coins are in someone else’s custody,” he adds. “Even when you submit a coin to a grading service, you’re going to have a receipt or something showing proof through signatures, transfers of the coin in the mail, or anything else showing that your coin left your hands and is in the custody of the post office, the grading service, or whatever.” Ultimately, in cases like these posed by Albanese, the paper trail helps determine responsibi­lity in recovering your losses if something tragic happens to your coins while they’re out of your hands. “I say it doesn’t matter if you trust me. I could get hit by a truck, or there could be a burglary. And I need to prove I had your coin. If not, you’re not getting your insurance money.”


Whether or not you ever get audited by Uncle Sam, need to file an insurance claim, or dabble in bullion-based retirement investment­s, keeping a personal log of the coins you own, what you paid for them, where they’re located, and how much they’re worth now is simply the mark of a good collector. And there are so many more ways than ever before to embark on creating a paper trail, literal or virtual, for your numismatic holdings. Yes, paper and pen don’t need batteries, never need charging or updating, and won’t leave you stranded when there’s no wi-fi. But give digital technology a chance. It’s easy and intuitive to use, provides an efficient path for completing numerous files of records, and can be securely stored in the digital “cloud,” making it accessible to you and those confidenti­ally entrusted to your informatio­n from virtually anywhere. There’s also a peace of mind in knowing that someplace there exists an itemized rundown of your coins and numismatic assets, what you paid for them, what they would cost to replace, and where you can find them. Ledgers like these have multiple benefits, including helping you see what holes you have in your collection and giving you a glimpse of what you may have multiples of and can sell to buy other items you really want for your collection. Besides, many numismatis­ts love looking back at what they paid for a coin 20, 30, even 50 years ago. As records age, they gain importance not just as financial documents but also as historical archives. Such paperwork may one day help piece together a picture of what the coin market was like at a particular time and place in the past. Talk about leaving a legacy…

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