A California couple that discovered $10 million worth of gold coins last year will have to pay nearly half that amount in federal and state income tax, regardless of whether they sell the coins.
Interestingly enough, the couple’s newfound tax burden is not exactly unprecedented.
The San Francisco Chronicle noted that a U.S. District Court in Ohio ruled in 1969 that a “treasure trove” is a taxable event and can be applied to the year the so-called treasure is discovered.
Further, in its 2013 tax guide, the Internal Revenue Service states, “If you find and keep property that does not belong to you that has been lost or abandoned (treasure-trove), it is taxable to you at its fair market value in the first year it is your undisputed possession.”
The not-yet-identified California couple found 1,427 rare, mint-condition gold coins buried in their backyard last February. This means they will have to pay a tax on the estimated value of the coins by April or else suffer a penalty and additional interest charges, Leo Martinez, a law professor at the University of California Hastings College of the Law told the Chronicle.
Additionally, he said, most of the couple’s cash will be “subject to the top federal tax rate of 39.6 percent, which starts at $450,000 in joint taxable income.”
The top taxable rate on joint income of $1 million or more in the state of California is 13.3 percent.
Now, it’s worth noting that taxpayers are normally granted a federal deduction for state income tax paid, reducing their effective federal rate.
Still, even with the deduction, the taxable amount the California couple is looking at for both state and federal clocks in at about 47 percent.
The couple isn’t without recourse, Arthur Dellinger, a CPA with Cooper, Moss, Resnick, Klein & Co., told the Chronicle. He said they could argue that the coins are a capital gain because “when they bought the property, it was part of the property and part of the acquisition price,” but said it was unlikely that argument would succeed.
The couple has until April 15 to pay the taxes owed on their discovery.
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