Do You Have to Pay Income Tax when You Find Gold?
/The good news is that you found a lot of gold. The bad news is that you probably have to declare the value of the gold as income when you file your taxes and then pay income tax on it.
That’s the lesson we learn from a now-classic court 1969 case called Cesarini v. United States. We’ll tell you all about that court case in a minute, but for now let us say that we’re only telling you about it for informational purposes and are not offering you legal advice. If you have found gold and are trying to decide how to report it when you file your taxes, you should follow the advice of your attorney and/or accountant, not the information we provide in today’s post.
The Interesting Story of Cesarini v. United States
Way back in 1957, Mr. and Mrs. Cesarini in Ohio purchased an old piano at an auction for $15.00. Seven years later while cleaning the piano, they found old gold coins hidden in it. They took their gold to a bank and cashed it in for $4,467.00, which they then deposited in their bank. Because the Cesarinis were honest people, they reported $4,467.00 as income on their 1964 tax return. The following year, they changed their minds and filed an amended return that asked to deduct that amount from their 1964 income; they requested a tax refund of $836.00, claiming that they had over-reported their 1964 income. Among other arguments, they stated that the $4,467.00 should have been reported as capital gains, not income. The IRS wasn’t happy with that, refused to issue a refund, and filed a lawsuit against the couple. In the end, they had to stick with their first decision to report the $4,467.00 as income; their request to remove that sum from the income they reported on their 1964 return was denied by an Ohio court.
What Does Cesarini vs. Ohio Mean for Your Gold Profits?
The first lesson is that if you find gold, you need to talk with your tax preparers and will probably have to declare the value of your find as ordinary income. But as the following scenarios demonstrate, there are plenty of tricky questions to answer about taxes . . .
- If you buy a batch of old eyeglass frames for $100.00, spend $100.00 to extract the gold, and then sell the gold for $400.00, can you deduct the $100.00 recycling fee from the $300.00 income you realized when you sold your gold?
- If you acquired a collection of gold coins for $3,000.00, paid an appraiser $500.00 to tell you it was worth $6,000.00 and then sold the collection for $6,000.00, can you deduct the $500.00 appraisal fee from your taxes?
- If you inherit a gold bullion bar from an elderly relative and the estate tax return reported its value at $350.00, is that your cost basis if you later sell the bar for $500.00?
Yes, it is all complicated and you need professional advice to make sure you file taxes correctly. But here is some straightforward advice we can offer you. If you look inside your old piano or anywhere else and find hidden gold, you should call us at 800-426-2344 and let us test what you have and tell you what your gold is worth. When you call, be sure to ask about the free or discounted shipping we offer on items that you send us for testing.
Related Posts:
Where to Find Hidden Gold and Other Valuables in and Around Old Houses
Discoveries of Gold and Silver Encourage Us All to Keep Hunting for Precious Metals
Some Solid Advice on Investing in Gold Coins
Three Unexpected Places You Could Find Sunken Gold
