Cost Basis for Physical Metals: The Number That Quietly Decides Your Tax Bill

Every tax rule that applies to bullion — the 28% cap, the one-year line, loss harvesting — runs on one input: your cost basis, lot by lot. Here is what actually belongs in it, which lot counts as sold when you cannot show it, how inherited and gifted metal differ, and how to reconstruct a basis you never wrote down.

Published · 9 min read

Key Takeaways

Our guide to the US tax rules for metals and the worked scenarios on today's gains both lean on an assumption that deserves its own article: that you know what you paid. Every rule in the collectibles regime — the 28% cap, the one-year boundary, harvesting a loss — takes cost basis as its input, lot by lot. Get the basis wrong and every downstream number is wrong, and the common mistakes, such as recording spot instead of what you paid or losing receipts, all push toward paying more tax than you owe. All prices in this article are quoted in US dollars (USD) per troy ounce. This is educational material about record-keeping and how the rules work, not tax advice.

What Basis Actually Includes

Basis is your full cost of acquisition, not the metal's spot value at the moment you bought it. For a typical retail purchase that means the dealer’s all-in price — spot plus premium — plus shipping, plus any sales tax charged at purchase (unless you deducted that sales tax on your return), plus other costs of buying. On a stack built from many small orders, the gap between spot-only records and true basis compounds: 100 oz of silver bought at $23 spot with a 12% all-in premium has a true basis of $2,576, not $2,300, and whatever the metal later sells for, the spot-only record overstates the taxable gain by $276 on that one order. Multiply by years of orders and the systematic overstatement becomes real money surrendered voluntarily.

The premium you grumbled about paying still counts: it is part of what you paid, so it lowers your taxable gain when you sell — if you recorded it.

Lots, and What Happens to People Who Don't Track Them

Each purchase is a separate tax lot with its own acquisition date and its own basis. When you sell five coins out of forty, those five came from specific lots — and which lots determines both the size of the gain and whether it is long-term. Sell the 2023 lot bought at $2,000 and the gain is enormous but comfortably long-term; sell the lot bought eleven months ago and the gain is smaller but taxed at your full ordinary rate. The choice is legitimate and valuable, but it has a prerequisite: records adequate to identify which pieces were sold. For shares, a Treasury regulation sets the rule: you may identify the lot you sold, and shares you cannot identify are treated as the earliest you bought. No statute, regulation or IRS publication sets a rule for bullion, so the safe course is the one the share rules reward: records made at the time that tie each sale to particular lots, down to serial numbers on bars where they exist.

Without such records, expect first-in, first-out: the oldest lots are treated as sold first. It is the written rule for shares and digital assets you cannot identify, and in a 2024 case the Tax Court had a seller’s silver purchases and sales matched that way. After a multi-year rally, first-in, first-out is close to the worst case — your oldest lots are your cheapest, so every sale realises the largest possible gain first. An investor with clean lot records selling the same five coins can often report a materially smaller gain, entirely legitimately, simply by identifying different lots. That is not a loophole; it is what the records are for.

SituationBasis treatmentThe trap
Bought from a dealerEverything paid to acquire: spot + premium + shipping + sales tax at purchaseRecording spot only — overstates every future gain
Accumulated over yearsEach purchase is its own lot with its own date and basisNo lot records → first-in, first-out → oldest, cheapest lots treated as sold first
InheritedFair market value at the date of death (or the estate’s alternate valuation date), whether higher or lower than the original costUsing the deceased’s original purchase price, which can overstate the gain by decades of appreciation
Received as a giftGenerally carries over the giver’s basis; a different basis applies to a loss if the metal was worth less than that when givenAssuming a step-up. There is none for gifts; the appreciation comes with the coins
No records at allProving basis is up to youCourts have treated an unproven basis as zero; any estimate is weighed against you

Inherited Coins Are Not Gifted Coins

The two most emotionally similar ways to receive metal are the two most different for tax. Metal inherited from an estate takes its fair market value on the date of death as its basis (or its value six months later, if the executor elects the alternate valuation date on the estate-tax return), and the appreciation before that date is never taxed as income. The rule cuts both ways: metal worth less than the deceased paid takes the lower value. A sale of inherited metal counts as long-term however soon it happens. Metal received as a gift during the giver’s lifetime generally carries the giver’s basis over to you — grandfather’s Krugerrands gifted today carry grandfather’s 1978 cost, and the entire appreciation since 1978 is your taxable gain when you eventually sell. (If the metal is worth less than the giver’s basis when it is given, a different basis applies to a loss.) It is easy to choose between the two casually, without knowing that the choice reprices the entire embedded gain. If the estate files an estate-tax return, the value it reports is generally the one to use; otherwise, documenting the date-of-death value at the time — a dated appraisal or the published spot price for that day, per piece — costs nothing and saves the heirs from reconstructing it later.

Reconstructing a Basis You Never Wrote Down

Most stackers reading this have at least a few positions with no paperwork. Reconstruction is usually possible, and the quality of the result depends on how many of these sources still exist: dealer account histories and re-issued invoices, credit card and bank statements showing the charge, order confirmation emails, and shipping records that date the purchase. Where only the approximate purchase date survives, the published spot history for that date plus a documented, defensible premium assumption is far better than nothing — a reconstruction with a paper trail and stated assumptions is a position you can defend, while a guess produced during an audit is not. The honest hierarchy: contemporaneous records beat reconstructions, reconstructions beat estimates, and everything beats having nothing, because proving basis is up to you. Courts have treated a basis the taxpayer could not prove as zero. Where there is some evidence they may estimate one instead, but they weigh the doubt against the taxpayer: in a 2017 Tax Court case, a seller of coins with no purchase records was allowed an estimated $12,000 of cost.

  1. For every existing lot: the acquisition date, quantity, product, and full cost including premium — reconstructed now, while dealer histories and statements are still retrievable.
  2. For every new purchase: keep the invoice, and record the all-in cost at the time. Thirty seconds at purchase replaces hours of reconstruction at sale.
  3. For inherited metal: use the value on the estate-tax return if one was filed; otherwise document fair market value on the date of death, per piece, at the time of inheritance.
  4. For gifted metal: get the giver's basis and acquisition date in writing when the gift is made — it is your basis now, and only the giver knows it.
  5. For every sale: record the date, proceeds, selling costs, and which lots were sold, so the disposal is identifiable years later.

This is, transparently, the problem GoldSilverPortfolio Premium is built around: a lot-level ledger where each purchase carries its date and full cost, disposals are matched to specific identified lots, and Form 8949-ready worksheets are produced from the records rather than from memory. The free portfolio tracker records full purchase costs too, and shows the gain or loss on each holding at live prices; the estimate of the tax on a sale sits in Premium's "If you sold today" preview. Whichever tool you use — including a spreadsheet — the principle is the same: the tax code prices your discipline, and it pays the organised.

Sources and Methodology

The rules in this article were checked in September 2026 against the Internal Revenue Code, Treasury regulations, IRS publications and court decisions. Two researchers worked independently from the primary texts, one starting from the statute and regulations and one from IRS guidance, and their findings were compared. Where no written rule covers bullion, as with which lot counts as sold when you cannot show it, the article says so and names the rule it draws on instead. The worked example is our own arithmetic.

Conflicts of interest: none of the sources has a commercial interest in bullion. GoldSilverPortfolio sells TaxStack, the Premium record-keeping tool this article describes.

Primary sources