7713 / What is a collectible?

In the broad sense, a “collectible” is any item of property that derives its value directly from its rarity and popularity. An item’s history, condition, composition, artistic and aesthetic qualities, and the number of similar items in existence may each play a part in determining the value of a particular collectible. However, the presence or absence of a ready market where the item may be traded will have a great deal to do with whether a particular class of property is an investment quality collectible. Common investment quality collectibles include rare coins and currencies, works of art, metal or gems, and stamps. Oriental rugs, antiques, and certain alcoholic beverages (rare wines) are also often held as investments.¹ However, it is important to note that many collectibles may not be purchasable in an IRA, or qualified plan. However, certain precious metals are exempt from the broad qualified and IRA prohibition against the purchase of collectibles.

Coins

There are two types of coins held for investment purposes. Numismatic coins (such as the United States $20 gold pieces circulating pre-1934) derive their value from qualities, such as condition and number minted, which make them rare; metal content is only one of many elements contributing to the value of such numismatic (or rare) coins. On the other hand, bullion-type coins (such as the Canadian Maple Leaf, the Mexican Peso, and the Austrian Corona) derive their value solely from their metal content (although a striking premium may also be added into the market value); they represent investments in the world gold or silver markets rather than in the coins themselves.²

In either case, however, the coins should generally be treated as “collectibles” for tax law purposes, in the same way that a gemstone, stamp, artwork or a vintage wine is a collectible. Even if a bullion-type coin is not a “coin” within the meaning of IRC Section 408(m)(2)(D), it ought to fall within the category of “any metal or gem” under IRC Section 408(m)(2)(C). However, the IRC exempts certain coins issued by the United States or an American state from the definition of “collectible,” such as gold coins issued by the U.S. and real silver dollars of the “old-fashioned type.”³

1. IRC § 408(m).