Many Self-Directed IRA investors may not realize that coins and bullion/precious metals may be purchased with retirement account funds, as per IRC 408. Additionally, they may not know that IRC 408 requires items purchased with retirement funds to be held physically in possession by either their trustee or approved depository.
Tax professionals disagree. While some IRA holders believe storing coins in a bank safety deposit box satisfies this requirement, this does not satisfy them.
What is Precious Metals?
There are various methods of investing in precious metals, from purchasing silver coins or gold bullion to investing in mining stocks. Precious metals are naturally occurring elements with high economic value; examples include gold, silver and platinum as well as the more obscure iridium, osmium rhodium and ruthenium which are rare yet have great worth making them attractive investments for investors.
Metals are considered precious because they’re beautiful (making them great materials for making jewelry) and rare, making them more valuable than common metals such as aluminum or iron. Furthermore, precious metals have practical uses; gold conducts electricity extremely efficiently so it is often used in electronics devices and other gadgets.
Can I Buy IRS Approved Coins With My Retirement Account Funds?
Due to extensive advertising by precious metals dealers, many people are aware of how they can invest in IRS approved coins and bullion with their retirement account funds – offering diversification while potentially avoiding taxes upon disposal – known as disqualified person transactions.
Many claim that coins and bullion/precious metals held at an approved depository (as defined in IRC Section 408) satisfy the definition of physical possession for their IRAs, since such depository can act as the trustee in accordance with IRC 408. This makes sense since depository facilities can serve as trustees under this provision of IRC 408.
However, tax practitioners disagree with this stance. Their argument centers around the distinction between personal possession and constructive possession – with personal possession referring to one’s ability to physically grasp an item while constructive possession requires power and intent control over an object – making this issue particularly complex and demanding professional guidance from a trusted advisor.
Can I Hold IRS Approved Coins or Bullion/Precious Metals Personally?
People often turn to investing in precious metals because they perceive it to be safer than investing in stocks, mutual funds or ETFs. Physical possession of gold and other precious metals provides greater security as well as diversifying one’s retirement portfolio with tax-free gains.
One popular approach among Self-Directed IRA LLC owners is holding IRS approved coins or bullion/precious metals in an IRA account in their bank’s safety deposit box – however this could present problems should the IRS audit their IRA account. An alternative way of holding precious metals would be through an approved trustee or depository.
Be mindful that if you pass down an inheritance of precious metals to another, gift taxes may apply and should consult a trusted tax professional for advice. Furthermore, any transactions on the same day involving coins or bullion/precious Metals that must be reported as related transactions to the IRS.
Can I Hold IRS Approved Coins or Bullion/Precious Metals in a Safe Deposit Box?
As more precious metals dealers advertise the fact that individual retirement accounts (IRA) may hold coins and bullion, it has become more widely understood. What remains less clear, however, is how storing this material in a safe deposit box might work as well.
Self-Directed IRA LLCs provide many individuals with an opportunity to diversify their portfolios with tax-free investments such as coins and bullion/precious metals approved by IRS. Many are seizing this chance.
Holding these assets personally within an IRA would violate IRS code 408. As this requirement refers to “physical possession by the trustee”, this may create difficulties for individuals using this approach.
One way of overcoming this issue is for an IRA LLC to purchase and register its own safe deposit box, so that only its owner has access to it and no third parties.
