Is a bullion coin or a numismatic(collectible) coin considered a security or an investment?
Question by AC: Is a bullion coin or a numismatic(collectible) coin considered a security or an investment?
I have been researching federal laws (SEC and CFTC laws) and still cannot understand if a bullion coin is considered a security? If so, how? Would it be considered an investment contract? And in that same aspect, if it is a security, then would that mean that the person selling it has to be registered with the SEC?
Same question would apply for numismatic (or collectible) coins.
THANK YOU!!
Thank you Jeff. Can you elaborate on what would be a derivative contract? I understand it’s a 3rd party contract but how would this affect the sale of a coin?
Best answer:
Answer by jeff410
A security is a financial investment. Coins are collectibles and considered alternative investments. The SEC has nothing to do with collectibles, unless there was some kind of derivative contract on it.
What do you think? Answer below!
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Physical Bullion is “property”. It is technically an investment which is taxable when you sell for a profit. A Gold or Precious metals IRA would be a securities instrument and their is a good chance that it is not backed by real bullion.
“Google” Ted Butler and James Cook at Investment Rarities in Minnesota. They have a great newsletter that really explains the precious metals market.
What exactly to you mean by “security?” For what purpose?
No is the short answer. Both bullion & coins are considered a collectible for tax purposes, making them ineligible for the 15% capital gains rate
Financial instruments is anything derived from a security, almost always in contract form (“with an enforceable contract”) and regulated by the SEC either by default or by specific mention. State regulations also apply. This should not impact the sales of physical gold in ordinary commerce. Physical gold is not a financial security or a derivative or a financial instrument.
The GLD and SLV ETF’s are mutual funds that own the physical metal and are generally superior to owning physical gold yourself for investment purposes. They are also ineligible for the 15% capital gains rate
The sale or purchase of gold in ordinary commerce should not run afoul of securities regulation. The sole exception is as a specific form of payment. Although the restriction applies specifically to banks, as a merchant it is possible that you might run into complications if you did something like issuing “certificates” that could be “redeemed” in gold or some other commodity.