My brother relies on a prescription drug discount in order to afford a drug he needs to survive. I think he might have just disqualified himself.

Pay Dirt is Slate’s money advice column. Have a question? Send it to Kristin and Ilyce here. (It’s anonymous!)

Dear Pay Dirt,

My 88-year-old brother recently came to live with me from the opposite coast because he needs more care than he was getting. He pretty much stopped taking care of business a while ago, and I am trying to get his finances back in order, although he makes the decisions.

We were able to retrieve valuable coins from his former state’s unclaimed property program, but had to sell many of them because they were too heavy to transport, and he got tens of thousands of dollars from the sale. I now think this is going to turn out to be a big problem for him.

I assume that he will have to pay capital gains tax on the amount that the coins’ value has increased since he and his (now deceased) wife purchased them. However, he does not remember when they bought the coins or what they paid for them. How are the capital gains treated, as income taken all in the year of sale or amortized? When he figures out when he and his wife bought them, how do we find out what they were worth at that time?

I am particularly concerned about this as he is extremely low income, living on less than $1,000 a month income plus savings. He does not have prescription coverage and receives a very expensive drug for a chronic condition from the pharmaceutical company for free due to his low income. I am afraid he will lose this benefit if his income is too high for one year due to the sale of the coins.

—Worried

Dear Worried,

You’re smart to get ahead of this. To clarify what you’re talking about here, the IRS treats any profit from selling certain collectibles, like coins, as a capital gain. In other words, your brother will owe taxes on the difference between what he paid for the coins (his “cost basis”) and how much he sold them for.

And because coins are classified as collectibles, the tax rate can be higher than it is for regular investments. If he owned the coins for more than a year, the gain will be taxed up to 28 percent. If he owned them a year or less, the profit is taxed as ordinary income—up to 37 percent, depending on his tax bracket.

The tricky part is figuring out what the coins originally cost him. If he doesn’t remember and doesn’t have any records of the sale, the IRS expects a reasonable estimate. You can look up historic prices for the type of coins he had—there are online databases and coin dealer archives that show what coins were worth in past years. If you know roughly when he bought them, you can use those prices to estimate their original value. Ideally, your brother would have documentation to prove what he paid for the coins, but without that, the best he can do is an estimate.

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If his income is low, he’s reporting the sale honestly, and especially if he leaves a note about how he came to estimate the cost basis, the chance of getting audited is probably low, but your best bet is to talk to a tax professional. They can help you write up a note or explanation to include with the return, just in case the IRS ever asks questions about his estimate. You can start your search through the IRS Directory of Federal Tax Return Preparers or the National Association of Enrolled Agents.

As for the impact of this on his benefits, you’re right—the sale could bump his income for that tax year and potentially disqualify him from certain programs. This usually isn’t permanent, though. Most programs will re-evaluate eligibility each year. Again, a tax professional can help you sort through the details and figure out ways to avoid something like that. If the prescription assistance he’s getting is part of a private Patient Assistance Program  (in other words, it comes directly from the pharmaceutical company rather than a federal benefit) it’s worth contacting the company directly to explain the situation and see how the sale might affect his qualification.

You’re doing the right thing by asking questions and trying to protect your brother. But the truth is, it could get complicated, and you don’t want to risk mistakes with the IRS. A good tax professional might cost you a few hundred bucks, but the peace of mind will be well worth it.

—Kristin

More Money Advice From Slate

My husband travels for work so I am often alone with our two small children. We have a guest room and are located a bike ride away from two different colleges. Rented rooms here average at least $800. We had success asking students from families we know if they wanted to stay with us in exchange for 10 hours of child care and their own groceries. We ask that they have no overnight guests and maintain reasonable hours. It worked beautifully—until “Mia,” a cousin who commutes two hours away to attend class here.

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