Quick Read
Inherited gold coins get a stepped-up basis, but gains from the date of death to the sale are taxable collectibles income at up to 28%.
A $50,000 coin gain on top of $95,000 in retirement income can push a single filer’s Part B premium from $203 to $406 per month for a full year.
Splitting coin sales across two tax years, documenting date-of-death value, and modeling MAGI before selling can prevent crossing costly Medicare surcharge thresholds.
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A retiree sells his late father’s gold coin collection this summer for roughly $4,700 per ounce of gold content. His accountant confirms that the inheritance itself was not federal taxable income. Under Internal Revenue Code Section 1014, inherited property generally receives a new basis based on its value at the date of death.
He assumes the check is clean money. Two years later, Medicare can deliver a different answer and roughly double his Part B premium for an entire calendar year. The trap sits in the appreciation between the funeral, the sale, and in the way that gain lands inside Medicare’s income lookback.
Why the Step-Up Covers Only Half the Story
The stepped-up basis prevents the appreciation during the father’s lifetime from becoming the son’s capital gain. If the coins were worth $1,800 to $2,000 an ounce when his father died three or four years ago, that becomes the starting point for calculating the son’s gain.
The increase after the death remains taxable. If the coins sell for $4,700 an ounce, the difference between their date-of-death value and sale price is generally a long-term collectibles gain. The federal rate on net collectibles gain is capped at 28%, although the actual rate can be lower depending on the taxpayer’s income.
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That net gain also flows into adjusted gross income (AGI) and the modified adjusted gross income (MAGI) Medicare uses to calculate the income-related monthly adjustment amount (IRMAA). For this purpose, MAGI is AGI plus tax-exempt interest. Municipal bond income that appears “tax-free” still counts, as does the taxable gain on the coins.
Source: finance.yahoo.com
