Gift of gold

Question: Our youngest daughter, a registered nurse in San Diego, is marrying a doctor later this month and we would like to give them a unique and financially solid monetary gift. My thoughts have turned to gold coins and we are, at this point, thinking a gift of US$5,000 in American Eagle one ounce gold coins. These would give them some future protection in consideration of troubling U.S. economic conditions. I would appreciate your advice and will look forward to your reply. – E.A.

Answer:

U.S. gold coins certainly have the advantage of having their face value protected and if the price of bullion should soar they may even gain in value in the collectors’ market. However, they pay no interest and there is nothing you can do with them but put them away in a safety deposit box.

If you want to give a financially-related gift, I would prefer a U.S. Treasury bond. The interest rates aren’t high right now but at least the bond will provide some return. If it has a relatively short maturity date (say three to five years) it can be rolled over at that time when rates may be higher. It is also readily marketable should they need the cash for any reon.

However, there is a bit of a wrinkle here: U.S. gift tax. According to the website of the Internal Revenue Service (IRS), “Generally, property you receive as a gift, bequest, or inheritance is not included in your income. However, if property you receive this way later produces income such as interest, dividends, or rentals, that income is taxable to you.” So the interest on the bond would be taxable. So also would any capital gains if they should sell the American Eagles at a profit over face value.

Another option is a down payment on a house, if they don’t already have one. That won’t generate any income, so will not be taxable.