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Tax marks the spot! IRS officials lay claims on found treasure

Everybody has probably hears stories about people who make a seemingly low-valued purchase at a garage sale and then discover a large cash reserve concealed within the item. While these examples of finding treasure might amount to little more than urban legends, one thing is certain: Found treasures can be considered taxable windfalls by the Internal Revenue Service.

This concept recently came to light with the recovery of gold worth $1.3 million in a shipwreck off the coast of South Carolina. The ship sank well over a century ago, but now the IRS has an interest in taxing the value of the gold found and recovered by a private company, Odyssey Marine Exploration.

Federal law considers found cash or valuables to be taxable income. In fact, a U.S. Supreme Court ruling confirms this. Regardless of whether or not a person put work into finding or recovering a treasure, it is still subject to taxation. Forbes points out that the phrase "treasure trove" even appears in the U.S. tax code.

The lesson in all of this is for individuals to not be caught off guard by what the IRS considers to be taxable income. If tax officials catch wind that a person fails to claim an unexpected cash discovery as income, then a tax dispute may be put into motion.

At the same time, however, it's understandable how a person could be taken aback by a claim for unpaid taxes. The federal tax code is immensely complex and some people make honest mistakes. Still, it helps to prepare to effectively resolve a tax dispute with the IRS.

Source: Forbes, "Gold Bars Pulled From 1850s Shipwreck? Taxable Says IRS," Robert W. Wood, May 6, 2014

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