Precious metals provide diversification many investors seek in their retirement accounts, and the IRS allows IRAs to purchase and store them according to certain guidelines.
Rhode Island couple made this mistaken decision, relying on statements from Check Book IRA to purchase American Eagle coins and store them at home. But that decision proved costly in terms of lost savings.
The IRS classifies precious metals as collectibles, meaning that when you sell them they could be subject to up to 28% in taxes compared with 15% long-term capital gains rate applicable to investments such as stocks and real estate.
An LLC may help you avoid taxes when investing in precious metals, however a qualified escrow bank account must be used and both parties must agree to be bound by Treasury Regulation 1031 for any exchange to be successful.
An LLC must not operate within your state, making Wyoming LLCs ideal. By placing precious metals within an LLC, they are protected from judgment creditors who can only obtain charging orders to take money distributed from it rather than actual physical assets like gold and silver which don’t depreciate like paper money can.
Precious metals offer an effective way to diversify your portfolio and defend against inflation. Over time, precious metals have proven their worth as investments by offering returns even during slumps in stocks and bonds markets. Furthermore, precious metals have industrial applications like catalytic converters used to reduce pollution from car exhaust.
As opposed to rental real estate where an LLC must qualify to conduct business within its state of origin, precious metal investments do not require Wyoming or Nevada LLCs for protection purposes; all that’s necessary to safeguard them properly is making sure the chain of title for any LLC is clear.
Some IRA custodians advertise “checkbook control IRAs” or LLC IRAs where an account holder self-stores precious metals at home, although these types of arrangements have never been approved by the IRS and Midas Gold Group does not endorse these accounts. By holding precious metals within an LLC with clear chain of title, any potential judgment creditors would need to go through an LLC first before seizing any of your assets.
Chain of Title
A chain of title is a record of all historical transfers of ownership over a property and includes any documents which impact legal rights to it, such as easements, CC&Rs, deeds of trust or judgment liens and tax liens.
Real estate titles are essential in real estate as they represent an amalgamation of rights associated with possession, control, exclusion, enjoyment and disposition of a home’s title. A title document typically must be registered with the local government authority; but similar titles are used across industries as a legal way of featuring and distributing movies in film industry.
Holding precious metals in an LLC provides you with a stronger chain of title than when holding them individually, since judgment creditors cannot directly gain access to them; rather they must first go through your Wyoming LLC in order to get a charging order and receive any distributions made.
Precious metals provide an invaluable diversifier to retirement portfolios. Their track record for protecting value speaks for itself, as they do not correlate to other investments such as stocks or bonds.
Holding tangible assets like bonds is also comforting when times get uncertain; unlike stock certificates or real estate which only exist as numbers on a screen. This reassurance can be especially comforting during times of economic instability.
Investing in precious metals may seem easy, but it is essential that you adhere to tax reporting requirements. The IRS considers precious metals collectibles and taxes them at a higher rate than other capital gains. If you sell precious metals at a loss, that loss can be used against future capital gains for tax reduction purposes.
IRAs allow investors to buy physical gold and silver through bars and coins or exchange-traded funds (ETFs), but investors should exercise caution when using self-directed IRAs/LLCs as the source for owning physical metal. One case found that Check Book IRA advised their client to store American Eagle coins from her IRA at home rather than use an outside depository facility for storage purposes.