The short version
A gold coin can feel like money, and a bullion bar can feel like a raw commodity. For federal tax purposes, that does not make the gain tax-free or automatically eligible for the normal 20 percent long-term capital-gain ceiling.
Coins and precious-metal bullion usually start inside the collectible rules because the Code names metals and coins. The hard part is the exception in Section 408(m)(3). That exception matters for certain IRA investments, but it is not a general escape from the 28 percent collectibles rate when an individual sells coins or bullion from a taxable account.
Two rules have to stay separate. The IRA rule asks whether an IRA’s purchase of coins or bullion is treated as a distribution. The individual-sale rule asks whether your long-term capital gain is collectibles gain. For the second question, Congress told us to read Section 408(m) without the paragraph (3) carve-out.
(“Bullion” means precious metal valued mainly for metal content, such as gold, silver, platinum, or palladium bars or coins. “Basis” generally means your tax cost in the asset.)
What the law actually says (primary authority first)
Start with Internal Revenue Code Section 408(m). It is an IRA rule titled “Investment in collectibles treated as distributions.” Section 408(m)(1) says that when an IRA or certain individually-directed qualified-plan account acquires a collectible, the acquisition is treated as a distribution equal to the cost to the account.
Then Section 408(m)(2) defines collectible. Two parts matter for coins and bullion: Section 408(m)(2)(C) includes “any metal or gem,” and Section 408(m)(2)(D) includes “any stamp or coin.” That is why gold, silver, platinum bullion, and coin collections start inside the collectibles definition.
Section 408(m)(3) then creates an exception for certain coins and bullion. It says that, for purposes of subsection (m), the term collectible does not include certain U.S. gold coins, certain U.S. silver coins, certain platinum coins, state-issued coins, and certain gold, silver, platinum, or palladium bullion. The bullion exception has two important conditions: the bullion must satisfy the statutory fineness rule, and it must be in the physical possession of an IRA trustee described in Section 408(a). Publication 590-B says the same thing in practical terms: IRA coins must be held by the custodian or trustee, and if the owner or beneficiary takes possession, the coins are treated as distributed.
That is the IRA side. The individual-sale rate rule is in Section 1(h). Section 1(h)(4) includes collectibles gain in “28-percent rate gain.” Section 1(h)(5) defines collectibles gain as gain from the sale or exchange of a collectible, “as defined in section 408(m) without regard to paragraph (3) thereof,” that is a capital asset held more than one year.
That last phrase is the trap. For the 28 percent rate, Section 1(h)(5) tells you to ignore the 408(m)(3) exception. So a coin or bullion bar that may fit the IRA carve-out can still be a collectible for the individual seller’s long-term capital-gain rate.
The sale calculation itself comes from Section 1001 and Section 1012. Section 1001 measures gain as amount realized over adjusted basis, and Section 1012 says purchased property generally starts with cost basis.
How it works in practice
Think of the problem in three lanes.
Lane 1: you sell coins or bullion in a taxable account. If you personally bought gold coins, silver rounds, or bullion bars and later sell them, start with proceeds minus basis. If the item is a capital asset and you held it more than one year, the gain can be long-term collectibles gain. The IRS says in Topic No. 409 that net capital gains from selling collectibles such as coins or art are taxed at a maximum 28 percent rate. Publication 550 also lists metal such as gold, silver, and platinum bullion and coins in the collectibles-gain discussion.
Example: you bought a gold coin for 2,000 dollars, held it for three years, and sold it for 3,100 dollars through a dealer that charged 100 dollars in selling costs. Before other adjustments, the amount realized is 3,000 dollars and the cost basis is 2,000 dollars, so the gain is 1,000 dollars. If the coin is a capital asset and the gain is collectibles gain, the federal long-term rate ceiling is 28 percent, not the normal 20 percent ceiling.
Lane 2: your IRA buys coins or bullion. Section 408(m)(1) says an IRA’s acquisition of a collectible is treated as a distribution equal to the cost to the account. Section 408(m)(3) prevents that result for certain coins and trustee-held bullion. This is why precious-metals IRA paperwork spends so much time on eligible coins, eligible bullion, and custody.
Lane 3: you take possession of IRA coins or bullion. The custody condition is not decorative. Publication 590-B warns that if the IRA owner or beneficiary takes possession of the coins, the coins are treated as distributed. That is a retirement-account tax problem, not a collectible capital-gain rate problem.
The mistake is mixing the lanes. A coin can be eligible for an IRA under Section 408(m)(3) and still produce collectibles gain when an individual sells the same kind of coin from a taxable account. The IRA carve-out answers the IRA distribution question. It does not rewrite Section 1(h)(5).
The numbers
The table below is a rule map, not a market-price table. It shows which authority controls each common coins and bullion fact pattern.
| Scenario | Federal tax lane | Main authority | Practical point |
|---|---|---|---|
| Individual sells a coin or bullion held more than 1 year as a capital asset | Long-term collectibles gain, maximum 28 percent | IRC 1(h)(1)(F), (h)(4), (h)(5); IRS Pub. 550; IRS Topic 409 | Section 1(h)(5) disregards the 408(m)(3) IRA carve-out |
| Individual sells a coin or bullion held 1 year or less | Short-term capital gain, ordinary-rate treatment | IRS Topic 409; IRC 1001; IRC 1012 | The 28 percent collectibles ceiling is a long-term rule |
| IRA buys a non-excepted collectible | Deemed distribution equal to the IRA’s cost | IRC 408(m)(1); IRS Pub. 590-B | The IRA purchase itself can create distribution treatment |
| IRA buys coins or bullion that fit 408(m)(3) | Carve-out can avoid collectible-distribution treatment | IRC 408(m)(3); IRS Pub. 590-B | Conditions matter, especially trustee or custodian possession |
One more detail matters: the 28 percent rate is a maximum, not a flat tax. If your regular rate is below 28 percent, the collectibles rate rule may not push the gain all the way to 28 percent. But it does remove the lower 0, 15, and 20 percent capital-gain rate structure that many investors expect for stocks.
What this means for you
- Do not use the IRA eligible-metals list as a taxable-sale exemption. The Code explicitly tells the 28 percent rate rule to ignore paragraph (3).
- Keep the custody rule separate. IRA coins and bullion need trustee or custodian handling when the exception depends on it.
- Track basis by item or lot. A stack of coins bought over several years can have several acquisition dates and costs.
- Price the tax before you sell. A long-term bullion gain may be in the 28 percent collectibles bucket, and higher-income sellers may also need to evaluate the 3.8 percent net investment income tax discussed in the lead article.
- Save dealer invoices, wire records, shipping records, authentication records, storage records, and sales statements. They support both basis and amount realized.
The clean planning question is not “Is this IRA eligible?” It is “Which lane am I in: taxable sale, IRA acquisition, or IRA distribution?” Once that is clear, the rate and reporting analysis is much less murky.
Related reading
- Collectibles and the 28% Tax Rate: Why Coins, Cards, and Art Are Not Taxed Like Stocks.
- What the IRS Counts as a Collectible (and When the Clock Turns a Flip Into Ordinary Income) (Collectibles Tax Notes, planned).
- Cost Basis for Collectibles: Solving the Receipt and Provenance Problem Before You Sell (Collectibles Tax Notes, planned).
The primary law cited above is linked inline: IRC Section 408(m), IRC Section 1(h), IRC Section 1001, IRC Section 1012, IRS Publication 550, IRS Publication 590-B, and IRS Topic No. 409.
How Sheepdog Tax can help
I am Noah Green, a CPA and Certified Fraud Examiner, and Sheepdog Tax is a veteran-owned practice. I help coin, bullion, and other collectibles holders review the tax treatment of a sale before they file, including holding period, basis, IRA carve-out issues, and whether the 28 percent collectibles rate applies. To request a collectibles gain review before you sell or file, reach me at noah@sheepdogtax.com.
Sources (primary authority first, then secondary)
- Internal Revenue Code Section 408(m)(1), (2), and (3) (IRA acquisition rule, collectible definition, and certain coins and bullion exception). https://www.law.cornell.edu/uscode/text/26/408
- Internal Revenue Code Section 1(h)(1)(F), (4), and (5) (28 percent rate gain and collectibles gain, including the “without regard to paragraph (3)” rule). https://www.law.cornell.edu/uscode/text/26/1
- Internal Revenue Code Section 1001 (gain from sale or disposition of property). https://www.law.cornell.edu/uscode/text/26/1001
- Internal Revenue Code Section 1012 (cost basis). https://www.law.cornell.edu/uscode/text/26/1012
- 31 U.S.C. Section 5112(a)(7) to (10), (e), and (k) (U.S. gold, silver, and platinum coin references used by IRC 408(m)(3)). https://www.law.cornell.edu/uscode/text/31/5112
- IRS, Publication 550, Investment Income and Expenses (collectibles gain, bullion examples, and 28 percent maximum capital-gain rate). https://www.irs.gov/publications/p550
- IRS, Topic No. 409, Capital Gains and Losses (collectibles such as coins taxed at a maximum 28 percent rate; short-term capital gains taxed as ordinary income). https://www.irs.gov/taxtopics/tc409
- IRS, Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs) (IRA investments in collectibles, certain coins and bullion exception, and custodian or trustee possession caution). https://www.irs.gov/publications/p590b
Prepared by Noah Green, CPA, CFE.