As a result of significant advertising by precious metals and coin dealers, it has become well known that gold, silver, palladium bullion, in addition to certain coins can be acquired with retirement account funds. In fact, Internal Revenue Code (“IRC”) Section 408(m) sets forth a list of approved precious metals and coins which are not considered “collectibles” and may even be bought with retirement funds. Even though IRC Section 408 generally deals with IRAs, section (m) relates to both IRAs and 401(k) plans.
Using a self-directed IRA or Solo 401(k) plan to purchase Internal Revenue Service (“IRS”) approved precious metals or coins, one can seemingly better diversify her or his retirement portfolio along with generate tax-free gains about the sale of your metals or coins.
IRC Section 408(m)(3)(A) lists the kinds of coins that may be purchased with retirement funds, which generally are American Eagle and U.S. state minted coins of the certain finesse. The Technical and Miscellaneous Revenue Act of 1988 (“TAMRA”) also allowed for the purchase of state minted coins. Whereas IRC 408(m)(3)(B), refers to gold, silver, or palladium bullion of a certain finesse which should be locked in the “physical possession” of the U.S. trustee as described under subsection IRC 408(a), and which essentially describes a United states bank, lender, depository, or approved trust company. Therefore, you should never hold IRS approved coins or precious metals/bullion owned by his / her retirement account personally, such as in his or her home.
We have seen some uncertainty as to if the “physical possession” requirement pertains to both IRS approved coins and metals/bullion. IRC Section 408(m) clearly states that gold, silver or palladium bullion needs to be held in the physical possession of a trustee, otherwise known as a Usa bank, lender or approved trust company. Hence, IRS approved precious metals will not be held personally or anywhere beyond the physical possession of the trustee, as defined under IRC Section 408(a). But what about IRS approved coins? Can IRS approved coins, as described in IRC Section 408(m)(3)(A), which is not going to range from the “physical possession of the trustee” language take place personally? Unfortunately, there is certainly not a whole lot IRS guidance on this point, but as coins can also be bullion, as defined in IRC Section 408(m)(3)(B), most tax practitioners go ahead and take position that IRS approved coins purchased with a retirement account must be locked in the physical possession of any trustee, as defined under IRC Section 408. However, the language in TAMRA does declare that a retirement account may purchase state minted coins as long as somebody holds them independent in the IRA owner. The language in TAMRA does not define “person” and interestingly does not reference the word “trustee.” So can one hold IRS approved coins personally? The safest approach is to hold IRS approved coins belonging to a retirement account in the “physical possession of your trustee.”
That begs the following question; can an LLC owned by a retirement account hold IRS approved coins and precious metals/bullion in a safe deposit box within the name of your LLC? Over the past ten or more years, the self-directed IRA LLC or checkbook control IRA has become popular among retirement investors, including precious metals and coin investors. A typical self-directed IRA LLC strategy involves IRS approved coins or bullion purchased through the LLC manager from the name from the LLC, which can be owned one-hundred percent by the IRA, and then held at the bank safe deposit box in the name of LLC. Just what exactly does the internal revenue service say about this? Unfortunately not so much, but it is essential to review whatever we know.
Let’s get started with IRS approved coins. If a an IRA holder holds coins in the safe deposit box with a Usa bank in the name in the Self-Directed IRA LLC, the coins are clearly not being held by the IRA owner personally, which with regards to state minted coins would manage to fulfill the language in TAMRA. When it comes to IRS approved coins which are not state minted, IRC Section 408(m)(3)(A) fails to seemingly add a “physical possession” requirement, however, some IRS approved coins, such as American Eagles, can be regarded as bullion and could then fit into the “physical possession” requirement under IRC 408(m)(3)(B) for bullion. Thus, holding IRS approved coins at the bank safety deposit box in the name in the IRA LLC Plan is obviously not from the “physical possession” of the IRA holder since they will physically be held inside a safe deposit box in the bank from the name of the best gold IRA companies. However, the 60dexmpky then becomes is if the lender the location where the coins are saved in the name from the IRA LLC is known as a trustee in the IRA, as based on IRC Section 408. The reply to this query can also be relevant when examining whether bullion/precious metals properties of a self-directed IRA LLC can be stored at the bank safe deposit box.
Unlike coins, IRC Section 408(m)(3)(B) clearly holds that the IRS approved bullion/precious metals has to be held in the physical possession of any trustee and will not be held personally. We now have discovered that a trustee is defined under IRC Section 408 being a U.S bank, financial institution, or approved trust company, together with a depository. The meaning of a United states trustee is outlined in IRC Section 408(a), which discusses the concise explanation of an IRA. So the argument goes when the IRS approved coins or bullion/precious metals are held at the bank safe deposit box in the name of the IRA LLC and also the bank is just not the trustee or perhaps the custodian of the IRA that support the coins or metals/bullion, then is definitely the physical possession definition satisfied which is the bank acting as the trustee from the IRA which owns the metals? There are actually arguments on both sides. For example, IRC Section 408(m) also is applicable to 401(k) plans and the meaning of a 401(k) plan trustee is not really just like a trustee of your IRA. Since the physical possession requirement outlined in IRC Section 408(m)(3)(B) is applicable to IRAs and 401(k) plans, some tax practitioners feel that the definition is satisfied so long as the bullion/metals are held at any bank or lender that satisfies the definition of trustee, as outlined in IRC Section 408(a), rather than necessarily the particular trustee from the retirement account owning the coins, bullion/metals.