Ultra-rare gold doubloon coin created more than 200 years ago sells for $7.4 million

An ultra-rare 1787 gold Brasher doubloon coin was recently sold for a sum of $7.4 million, which is one of the highest amounts ever paid for a gold coin, according to The Associated Press. The purchase amount has only been surpassed by that of a 1933 $20 Double Eagle that fetched $7.6 million at a 2002 auction, Bloomberg reports.

The coin was originally minted by a goldsmith and neighbor of George Washington named Ephraim Brasher, The Associated Press reports. Although the coin was only worth about $15 when it was minted, the gold it contains would have a market value exceeding $1,500 at present. The coin weighs in 26.66 grams, which is only 1.34 grams less than an ounce.

The Associated Press was told by precious metals dealer Blanchard and Co., the firm that brokered the transaction, that the sought-after coin was bought by a Wall Street investment company. Neither the name of the seller nor the buyer of the coin was revealed.

The coin's astronomical value is partially derived from the fact that it is in the only known coin where the eagle's breast contains a hallmark punch, according to the media outlet. There are five coins in existence where the eagle has a punch on its left wing.

The news provider reports that another factor that makes the coin unique is that market experts believe that it is the first gold coin to be denominated in U.S. dollars. Various coins denominated in the currencies of other countries were utilized during the nation's first years, and the Philadelphia-based U.S. mint did not produce any coins until the 1790s.

The doubloon was most recently sold in 2004 for a total of $3 million, the media outlet reports.

"We have known about it and coveted it for years," Blanchard chief executive Donald Doyle Jr. told the media outlet. "It’s not a stretch to call this the holy grail of all collectible gold coins."

He added that "while precious metals have been a hot news topic for the last several years, ultra-rare collectible numismatics have quietly continued to have strong investor demand."

Individuals that wish to buy and sell gold coins can realize tax benefits by setting up a 1031 exchange with a qualified intermediary such as Strategic Property Exchanges, LLC. The major benefit that an investor can realize by engaging in one of these exchanges is deferring taxation on the coins sold and therefore retaining all the equity they originally had.

Keeping all the equity held in the investment would reduce the debt needed for purchasing the replacement coins. This decrease in leverage would decrease debt payments and also interest costs. Since debt payments are made out of operating income, which can be taxed at rates as high as 40 percent, lowering debt means reducing taxes.

To provide an example, let's say that an investor owned an extremely rare gold coin worth $7 million and wanted to sell it. The investor finds replacement gold coins that will qualify as part of a like-kind exchange. He finds a buyer for his $7 million coin, and then works with a qualified intermediary to set up a 1031 exchange on the sale. He avoids paying income taxes on the coin sold, and retains all equity in the original item.

One final benefit of using 1031 exchanges is that there is no limit on the number of times they can be used. An individual who owns precious coins can take advantage of market opportunities as many times as he deems it profitable and worthwhile.