Key Takeaways
- Five pieces of jewelry Alexander Calder made for his sister, mother and niece go up for auction at Bonhams on Nov. 19, with an estimate of about $300,000.
- A grandparent who gives jewelry to a grandchild passes along their own cost basis, so the grandchild owes tax on the whole gain when they sell.
- A brooch bought for $5,000 and given away at $50,000 carries a $45,000 gain. Taxed at the 28% top rate for collectibles, that comes to $12,600.
- If the grandchild inherits the same brooch instead, its basis is its value on the day of death, so a sale at $50,000 shows no gain.
Alexander Calder is best known for the mobile, but he also made jewelry for the people closest to him. Five pieces he made for his sister, mother and niece go up for auction at Bonhams in New York on Nov. 19, and the auction house expects them to bring about $300,000 together.
Your family’s jewelry box probably won’t fetch Calder prices. But if you’re thinking about handing a valuable piece to a grandchild, I have some news that might change when you do it. Give it to them now, and they could owe thousands in tax when they sell it. Leave it to them instead, and they could owe nothing.
A $5,000 brooch, two ways
Let’s say you’re 76, and years ago you bought a brooch for $5,000. Today it’s worth $50,000, and you’d love for your grandchild to have it.
If you give it to them this holiday season and they later sell it for $50,000, they have a $45,000 gain to report. If they inherit it from you instead and sell it for the same $50,000, their gain is $0.
Same brooch, same sale price. The only difference is whether it changed hands while you were alive.
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A gift comes with your cost attached
When you give property away during your life, the person who gets it generally keeps your adjusted basis, according to IRS Publication 551. For the brooch, that’s your $5,000, so your grandchild owes tax on all the gain you built up once they sell. They take over your holding period too, Publication 544 says, so the gain counts as long-term.
Inherited property works differently. Its basis is generally its fair market value on the date the owner died, Publication 551 says, so the gain built up before then is never taxed. If the brooch is worth $50,000 the day you die, that’s your grandchild’s basis.
Collectibles pay up to 28%
Jewelry also gets a tougher tax rate than stocks. Most long-term gains are taxed at 0%, 15% or 20%. But the IRS counts gems and jewelry as collectibles in Publication 550, and net gains from selling collectibles are taxed at a maximum 28% rate under 2026’s rules. On the gifted brooch, the numbers work out like this:
- Sale price: $50,000
- Your basis, passed to your grandchild: $5,000
- Gain: $45,000
- Tax at 28%: $12,600
On the inherited brooch, the basis is $50,000, so a $50,000 sale shows a $0 gain and no tax.
The 28% is a ceiling, though. Publication 550 says it doesn’t apply to someone otherwise subject to a lower rate, so a grandchild with a smaller income could owe less than $12,600.
Plenty of heirlooms never get sold
Of course, a lot of family jewelry stays in the family for good. If your grandchild wears that brooch for the rest of their life, your $5,000 basis never shows up on a tax return, and giving it now costs them nothing in tax.
The difference only becomes a real bill when someone sells. That’s more likely for a piece nobody wants to wear, or one worth enough that a grandchild would rather have the cash.
Either way, write down what you paid for each valuable piece and when you bought it. A gift’s basis and holding period are yours, so your grandchild will need both if they ever sell.
I’d hold on to the pieces they’d sell
If I owned a $50,000 brooch with a $5,000 basis and thought my grandchild might sell it someday, I’d hold on to it and leave it to them. Sparing them a tax bill that could reach $12,600 is a pretty good gift on its own. For a piece they’d wear for life, I’d give it now and get to see them enjoy it.
One caveat: the step-up only covers the gain built up before death. If the brooch is worth $50,000 the day you die and your grandchild sells it years later for $60,000, they’d owe tax on the $10,000 in between.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
