Definition fo Collectibles for 28% Tax Rate

[WhiteOleander]

Need some input.

The pubs state that collectibles are subject to 28% tax rate reported on Sch D. They list gold, silver, bullion, coins, etc as collectibles. However, we have come across some info that seems to exempt gold, silver, and coins from the 28% rate.

Below is an excerpt is from IRS Code Section 1(h) (4).
It states that the definition of the collectibles is defined in IRS Code Section 408(m). This section refers to collectibles in an IRA. If this is how the code is to be interpreted, then gold, silver, coins, etc that clients are selling now are not subject to the collectible rate.

Are we misintrepreting this? Can anyone shed any light on this. We have quite a few clients selling gold and silver and they want the lower rates.

Thanks so much.

§ 1(h)(4) 28-percent rate gain

For purposes of this subsection, the term “28-percent rate gain” means the excess (if any) of—

§ 1(h)(4)(A) the sum of—

§ 1(h)(4)(A)(i) collectibles gain; and

§ 1(h)(4)(A)(ii) section 1202 gain, over



§ 1(h)(4)(B) the sum of—

§ 1(h)(4)(B)(i) collectibles loss;

§ 1(h)(4)(B)(ii) the net short-term capital loss; and

§ 1(h)(4)(B)(iii) the amount of long-term capital loss carried under section 1212 (b)(1)(B) to the taxable year.





§ 1(h)(5) Collectibles gain and loss

For purposes of this subsection—

§ 1(h)(5)(A) In general

The terms “collectibles gain” and “collectibles loss” mean gain or loss (respectively) from the sale or exchange of a collectible (as defined in section 408 (m) without regard to paragraph (3) thereof) which is a capital asset held for more than 1 year but only to the extent such gain is taken into account in computing gross income and such loss is taken into account in computing taxable income.

[JSLATER]

28%

I have similar discussions. The only time 28% lost was when the client's tax rate was lower than 28%. I read somewhere when you figure your maximum cap gains rate, if your regular tax rate is lower then you use the regular tax rate.

As to IRA's, I found this interesting statement:

If you invest your IRA in collectibles, the amount invested is considered distributed in the year invested and you may have to pay a 10% additional tax on early distributions.