## Facts

- An individual taxpayer, not a dealer in coins, bought United States $20 gold coins as an investment.
- After the coins appreciated, the taxpayer exchanged them for South African Krugerrand gold coins of equal total fair market value and held the Krugerrands for investment.
- The U.S. $20 gold coins were numismatic-type coins, valued based on factors including age, rarity, history, aesthetics, condition, and metal content.
- The Krugerrands were bullion-type coins, valued solely by metal content.

## Issues

1. Whether an exchange of numismatic-type gold coins held for investment for bullion-type gold coins held for investment qualifies for nonrecognition of gain under I.R.C. § 1031(a) as an exchange of like-kind property.

## Decision

- The exchange did not qualify for nonrecognition under I.R.C. § 1031(a).
- The taxpayer was required to recognize the gain realized on the exchange.
- The ruling distinguished prior guidance allowing § 1031 treatment for exchanges between bullion-type gold coins.

## Legal Principles

- For § 1031(a), “like kind” depends on the nature or character of the property, not its grade or quality; property of one kind or class cannot be exchanged for a different kind or class.
- Property may fail the like-kind requirement when it represents a materially different type of investment, even if physically similar (e.g., both items contain gold).
- Numismatic coins (collectibles whose value reflects rarity and related attributes) are not like kind to bullion coins (whose value reflects a commodity investment based on metal content).
- Prior rulings allowing § 1031 treatment for exchanges of bullion-type coins are limited to exchanges where both properties are bullion-type and reflect the same underlying commodity investment.

## Conclusion

An investor’s exchange of numismatic U.S. $20 gold coins for bullion Krugerrands is not a like-kind exchange under § 1031 because the properties reflect different kinds of investments (collectible coin value versus commodity gold value), so realized gain must be recognized.


Rev. Rul. 79-143, 1979-1 C.B. 264 (1979)