Why Not to Purchase Numismatic

What is a numismatic coin, and why not to buy them:

This article disproves some of the oft-repeated false claims made by some coin dealers.  These include:

1.  "Numismatic" coins are exempt from government seizure by law.  Totally false -- no basis in statute or regulation.

2.  Customer purchases of bullion gold coins must be reported to the government, but numismatic coins don't have to be reported.  Totally false -- no report is required when you buy gold, regardless of whether it is bullion or numismatic.  Only sales of certain gold and silver items must be reported -- and then only when they exceed certain quantities.

3.  Coins minted before 1934 are exempt from government seizure.  Totally false -- no basis in statute or regulation.

4.  United States $20 gold pieces minted before 1934 are exempt from government gold seizure.  Totally false -- no basis in statute or regulation.  In fact, it was mainly these coins which the government seized in 1933.

5.  The law defines "numismatic coins" as those having a premium of 15% or more over their gold content.  Totally false -- no basis in statute or regulation.  A regulation was proposed in 1984 but never adopted.

6.  The law defines United States $20 gold pieces as "numismatic" coins.  Totally false -- no basis in statute or regulation. 

In any emergency situation, all values tend to sink to their lowest common denominator.  Gold and silver coins would be measured for their precious metal content -- their melting value.  Premiums, especially numismatic premiums that depend on stable markets and widespread prosperity, cannot survive that sort of pressure.  Why spend money to buy premium that does not bring you any benefit?  If you have numismatic coins, act now, while you still can, to convert that numismatic premium into more gold and silver by swapping your numismatic coins for bullion coins.

The problem is that some gold and silver dealers continue to convince people to buy the more expensive U.S. $20 gold pieces on the basis that they are "numismatic" coins.  What difference does that make?  When gold was confiscated in 1934, these dealers claim that "numismatic" coins were exempted.

That logic is not convincing.  The exemption in 1933 was very vague: "...gold coins having a recognized special value to collectors of rare and unusual coins" (Presidential Proclamation of 4/5/1933).  Worse yet, our government tyrants are notoriously arbitrary.  If they confiscate gold a second time, why would you expect them to be consistent?  In any case, who will turn in his gold if his family's safety depends on it?  Besides, in 1933 U.S. $20's comprised the largest part of banks' gold reserves and most assuredly were not exempted from seizure.


But here's a new twist on things.  In the past 15 years dealers have been hammering out regulations with the IRS about the definition of "numismatic" coins.  Many dealers assert that some government regulation defines a "numismatic coin" as one that costs more than 15% over its gold or silver value.  (We'll examine this claim more closely in a moment.)  Relying on that definition, gold and silver dealers urge you to buy U.S. $20's, which sell at far more than a 15% premium.

But so far, nobody has noticed this other larger loophole:

The Gold Bullion Coin Act of 1985 (Public Law 99-185 of Dec. 17, 1985, 99 Statutes At Large 1177, 31 USC 5101, 5111, 5112) provided for minting the American Eagle ounce, half ounce, quarter ounce, and tenth ounce gold coins.  Section 2(3) provides, "For purposes of section 5132(a)(1) of [Title 31], all coins minted under this subsection shall be considered to be numismatic items."

The Liberty Coin Act of July 9, 1985 (Public Law 99-61 of 7/9/85, 99 Stat. 115, 31 USC 5112), authorized the one-ounce silver coin commonly called the Silver American Eagle.  At section 202(g) it contains identical language. 

By statutory definition then, the American Eagle gold coins and the silver American Eagles are "numismatic" coins.  (31 USC Section 5132(a)(1) requires the Secretary of the Treasury to apply proceeds from selling "numismatic" items to the cost of making them.)

It is impossible to find the regulation that defines a numismatic coin as one that sells for more than 15% over its bullion value.  Thanks to the Industry Council for Tangible Assets (ICTA), it is there in a proposed regulation 26 CFR 1.6045-1 on page 647-648 of the Federal Register, Vol. 49, No. 3, 1/5/1984.  But that proposed regulation was never adopted, and the current 26 CFR 1.6045-1 contains none of that language.  It is impossible to find it in any IRS letter rulings or other decisions either.  Even if this regulation did exist, nobody could ever find it. 

What's the bottom line?  Contrary to what most gold and silver dealers think, U.S. $20 gold pieces and silver dollars do not qualify as "numismatic" coins.

However, if the federal government intends to confiscate gold, any "exemption" for "numismatic" coins has to include the American Eagle gold and silver coins.  After all, not just a regulation but a statute specifically defines them as "numismatic."  I wonder if dealers who keep urging customers to buy the higher-priced U.S. $20's "because their higher premium qualifies them as numismatic coins" have thought of this?


Building its grid of government control, the IRS in the 1980s began to introduce 

(1) information reporting ("broker reporting") and 

(2) cash transaction reporting requirements ("cash reporting"). 

Broker reporting applied to a wide number of transactions, but those that concern us are "commodities."  That included any personal property for which the Commodity Futures Trading Commission (CFTC) has approved trading in futures contracts, among others, gold, silver, platinum, palladium, and U.S. 90% silver coins. 

Don't let this confuse you.  Sales to customers aren't reported, only certain purchases from customers are.  I repeat, I have not found any requirement in the law that anyone must report precious metals sales to customers per se. 

Specifically, according to Revenue Procedure 92-103, dealers need only report purchases from customers which could satisfy a futures contract.  That includes 

1)  lots of 25 or more (but not fewer) Krugerrands, Maple Leaves, or Mexican Onzas, 

2)  kilo gold bars, 

3)  100 ounce gold bars, 

4)  1,000 oz. silver bars, 

5)  $5,000.00 face value (five-bag lots, not five thousand bucks worth!) of U.S. 90% silver coin, 

6)  50 oz. of platinum, or 

7)  100 oz. of palladium. 

Now it seems that if the government intends to confiscate gold, any "exemption" for numismatic coins has to include the American Eagle gold and silver coins.  After all, not just a regulation but a statute specifically defines them as "numismatic."


Cash reporting, as opposed to broker reporting, is a hog of a different color.  Cash reporting requires certain entities to report receiving "cash" in amounts greater than F$10,000 (or F$3,000 in some circumstances).  For this purpose, the government isn't interested whether you are buying precious metals or fertilizer -- only that you plunked down "cash". 

The cash reporting requirements of 26 United States Code 6050-I supposedly have companion regulations at 26 CFR Part 1, Section 6050-I-1(c)(7)(i).  But note that the word "cash" has a special definition in this law.  In a December 30, 1993, letter the IRS Assistant Chief Counsel for Income Tax & Accounting, Vincent Cardella, wrote to the Industry Council for Tangible Assets (ICTA) as follows: 

Section 1.6050I-1(c)(1) of the Treasury Regulations defines the term "cash," in part, to include the coin and currency of the United States or of any other country, which circulate in and are customarily used and accepted as money in the country in which issued.  The term "cash" does not include [sic] bullion coins, such as gold bullion coins issued under the Gold Bullion Act of 1965 [sic], 99 Stat, 1117 [sic], nor does it include commemorative coins, such as coins issued under the Statue of Liberty-Ellis Island Commemorative Coin Act, 99 Stat. 113 (1985) [The American Liberty Coin Act].

But gold and silver American Eagles are legal tender.  Crazy as it sounds, this means that you could walk into a Mercedes dealership, plunk down 201 American Eagle gold coins with a face value of $10,050 and a paper money value of F$80,400, and it wouldn't be a reportable transaction.  It certainly appears that there is a hole in the cash transaction reporting laws big enough to drive a 747 jumbo jet through.  The simple way to avoid (not evade) cash reporting is to use American Eagle gold coins & silver American Eagles in everyday transactions. 

Crazier still, since Customs is a part of the Treasury, do you suppose that American Eagle gold coins are exempt from reporting as cash when you leave the country?

Of course it's crazy, but it's the government shooting themselves in the toe.  They hate gold and silver, and, just because they want to discourage people from using it, they write it out of their regulations but only succeed in making gold and silver more private than their FIAT currency.