Question Regarding Self Directed IRA

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DadzMad's picture
DadzMad
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Question Regarding Self Directed IRA

Sorry if this has been addressed in other posts, but I couldn't find anything in my searches.  It has been said in various forum replies and on other websites that in regards to self directed IRA's, cetain coins as described in section 408(m)(3) of the code may be held in possession in lieu of a third party; however, I read it differently and wonder if I am simply interpreting things wrong.  The code states " For purpose of this subsection, the term collectable shall not include - (goes on to describe the various coins, e.g. gold eagles, etc.) if such bullion is in the physical possession of a trustee described under subsection (a) of this section.."  This last part throws me off.  I'm not really the trustee of my self directed IRA, am I?  So my interpretation is that I am NOT allowed to take possession of my qualififed coins.  Any input would be greatly appreciated.  Thank you.

robbie's picture
robbie
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Read one interpretation of

Read one interpretation of the IRS position here:

irafinancialgroup.com

Some are taking the additional step of obtaining an affidavit that asserts the bullion will not be used in any disqualified actions as mentioned on the site in either a FAQ or in the checkbook IRA section.

This information is available elsewhere but it's nicely organized on this site. I have no financial interest or other conflict with the company.

DadzMad's picture
DadzMad
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Thank you Robbie!  I'll check

Thank you Robbie!  I'll check it out.

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Question Regarding Self Directed IRA

IRA owned precious metals should not be in the physical possession of the IRA account holder. If the IRS were to audit this situation the metals would be deemed distributed to the account holder and thereby would be taxable in the year the client took possession. 408(m) is pretty specific in that it states that the metals must be in the physical possession of the IRA trustee (i.e. the custodian of your self-directed IRA).

It is different with an individual 401(k). In that situation the account holder, as trustee of the individual 401(k) plan, could be in physical possession of the metals. However with an IRA that is not the case. Many providers pitch the idea of using an LLC to alleviate this issue however the rules that apply to the IRA will apply to the LLC that the IRA is the sole member of... so you are left with the same issue.

I can send you the direct link to the code that references what I am talking about. I hope this helps.

Patrick Hagen

The Entrust Group

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robbie
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After more than two years of

After more than two years of pursuing this issue with several highly specialized tax attorneys well-versed in this area (not associated with the company referenced below), I respectively disagree with you. The IRS regulations are not at all as straightforward as you depict above. 

What is your background and experience in this area? 

 

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Edit:  respectfully...

Edit:  respectfully...

PatrickHagen's picture
PatrickHagen
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After more than two years of

I've been working in the self-directed IRA administration industry for about 10 years. I certainly do not claim to be an expert in the issue however we have carefully read the IRS code sections that address this issue. Additional we have consulted with the department of labor on the issue (the DOL being the regulatory arm of the IRS in respect to prohibited transactions for IRAs).

I certainly would defer to a CPA or an Attorney that is familiar with the situation. There is some 'gray' in this issue. As a self-directed IRA administration company we cannot (and do not) give legal or tax advise. That said we do try to keep up on what the IRS allows and doesn't allow for IRA investing The information I am drawing from is below (see section in bold). I welcome your thoughts or questions.

408(m) Investment in Collectibles Treated as Distributions.

408(m)(1) In general. --The acquisition by an individual retirement account or by an individually-directed account under a plan described in section

401(a) of any collectible shall be treated (for purposes of this section and section 402) as a distribution from such account in an amount equal to the cost to such account of such collectible.

408(m)(2) Collectible defined. For purposes of this subsection, the term '

collectible' means

408(m)(2)(A) any work of art,

408(m)(2)(B) any rug or antique,

408(m)(2)(C) any metal or gem,

408(m)(2)(D) any stamp or coin,

408(m)(2)(E) any alcoholic beverage, or

408(m)(2)(F) any other tangible personal property specified by the Secretary for purposes of this subsection.

408(m)(3) Exception for certain coins and bullion. For purposes of this subsection, the term 'collectible' shall not include

408(m)(3)(A) any coin which is--

408(m)(3)(A)(i) a gold coin described in paragraph (7), (8), (9), or (10) of section 5112(a) of title 31, United States Code,

408(m)(3)(A)(ii) a silver coin described in section 5112(e) of title 31, United States Code,

408(m)(3)(A)(iii) a platinum coin described in section 5112(k) of title 31, United States Code, or

408(m)(3)(A)(iv) a coin issued under the laws of any State, or

408(m)(3)(B) any gold, silver, platinum, or palladium bullion of a fineness equal to or exceeding the minimum fineness that a contract market (as described in section 7 of the Commodity Exchange Act, 7 U.S.C. 7) requires for metals which may be delivered in satisfaction of a regulated futures contract, if such bullion is in the physical possession of a trustee described under subsection (a) of this section.

408(a)(2) The trustee is a bank (as defined in subsection (n)) or such other person who demonstrates to the satisfaction of the Secretary that the manner in which such other person will administer the trust will be consistent with the requirements of this section.

408(n) BANK. --For purposes of subsection (a)(2), the term "bank" means --

408(n)(1) any bank (as defined in section 581),

408(n)(2) an insured credit union (within the meaning of paragraph (6) or

(7) of section 101 of the Federal Credit Union Act), and

408(n)(3) a corporation which, under the laws of the State of its incorporation, is subject to supervision and examination by the Commissioner of Banking or other officer of such State in charge of the administration of the banking laws of such State.

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DadzMad
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Patrick, Thanks for the info,

Patrick,

Thanks for the info, I interpret the code the same way you do.  While I do not have a financial background, I do have a lifetime of interpreting federal construction regulations and dealing with their ambiguity under my belt.  I find the financial regulations actually pretty straightforward, but I've seem so much conflicting information I began to doubt myself.

To all, thank you for the responses.  The LLC may be something I review a little more, but it may be beyond the scope of my abilities.  I'm just glad that my money is out of the Ponzimarket.  We'll be out east for a wedding soon, I'll stop by the depository to check out our stack.  Everything is segregated and I'm welcome to make surprise visits......so they say.

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Question Regarding Self Directed IRA

Sorry a little late to the discussion.  first off, I am in process of creating a self directed IRA.  i have an existing employer sponsored 401k which I will roll over to a US custodian who will in turn transfer funds into an LLC owned by the custodian but managed by me.  My primary motivation is to allow more flexibility in investments I chose – i.e among other things - PM’s.  that said I do not have strong financial background and mainly reading on my own.  Regarding ownership of PM’s in a self directed type account I came across an article by Terry Coxon which states the following –

“It's an IRA that directly holds just one thing – a limited liability company that you manage. The IRA custodian is the legal owner of the LLC, but you deal with the custodian only during the setup process. During that process, assets are rolled over from your old IRA to the new custodian and then into the LLC. After that, you as Manager of the LLC have your hands on the steering wheel and can invest and reinvest in just about anything with any broker, dealer or other party, and you can do so without waiting for the custodian to approve anything and without paying the custodian for storage or for handling transactions.” 

It goes on to say:

 “In the case of gold and silver, since the metal will be owned by the LLC and not by the IRA custodian, you will be limited to American Eagles and Buffaloes. But you are free to buy them from any source that is not related to you, and you can store them in whatever way you think is best – in a safe deposit box, under the floorboards at home, or in the back of your refrigerator. And they don't need to stay or even be purchased in the US.” 

I have additional articles that say the same thing and go into more detail regarding IRS law / requirements / restrictions – apologies I only have hard copy and not in front of me at the moment.  Mr Coxon has been doing this for many years and regarded as expert on subject and endorsed from other reliable sources that I follow.  I have not committed yet as I am seeking more guidance but so far I believe a viable option.  I would be interested in any thoughts / comments.  Thanks in advance

silverinvestor's picture
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IRA LLC's and solo 401ks allow for holding gold at home
This information from Patrick is incorrect:
 
Many providers pitch the idea of using an LLC to alleviate this issue however the rules that apply to the IRA will apply to the LLC that the IRA is the sole member of... so you are left with the same issue.
I have investigated this issue for a couple of years and IRA LLCs can hold gold and silver eagles at
home in a safe but not bullion. There is so much misinformation out there.  I found a vendor that had a letter from an attorney who called the department of labor to ask the question directly and below is the summary from the letter:
 
"ISSUES:
May an LLC that is 100% or 95% owned by an IRA buy gold and the manager, who is the
beneficiary ofthe IRA, physically lake possession of the gold for storage purposes. What gold is allowed to be owned by an IRA and would those items be allowed to be owned and held by an TRA-LLC that's managed by the owner of the IRA?
 
SHORT ANSWER:
 
1. Can the Manager ofthe LLC - beneficiary of the IRA- physically take possession of
gold for storage purposes?
 
ANSWER: 1 contacted Gary Lefkowitz of the Depl. of Labor (202) 693-8546 as a prelude to
answering your question. Gary confirms that the LLC Manager may keep gold in a safe for andon behalf of the LLC as long as there is no "self-dealing" (personal gain by the transaction). SecProhibited Transactions (D) and (E). See also discussion below."
I then took this letter and passed it by an tax attorney in the irafinacial group and they confirmed that what
the letter says is true.  So there is an opinion letter from an attorney questioning the dept of labor on this
specific question and confirmed specifically by another different tax attorney.  To me, this demonstrates proof that one can hold eagles at home.  If audited by the IRS, you have a pretty good defense.
 
This doesn't apply to a normal self-directed IRA but one that is an LLC with specific information in their
articles of incorporation from what I understand.
 
The best vehicle to use is a solo 401k (cost $400-600) and there is no custodian and no LLC fees and corresponding hassle and doesn't require a yearly evaluation IRS form if the assets are under 200k so it offers more privacy at the same time.  
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Metal may not be safe at depositories

I don't believe you metal is as safe as you think if you are storing it at delaware depository:

 I'll stop by the depository to check out our stack.  Everything is segregated and I'm welcome to make surprise visits

Here is my reasons/experience that metal may not be safe at a delaware depository:

1. Most custodians have agreements with depositories for low fees like entrust for $125/yr for coins.If you have $100k in metal at the depository, how can it be insured for the full amount at this price?I called around found out the delaware depositories is only insured for approximately 75% of the inventory with lloyds of london according to my source.   Also, I was told if the metal appreciates, the insurance doesn't follow the appreciation.  Depositories hold insurance on a fixed dollar amount, not on replacing the metal.

2. The delaware depository holds COMEX silver.  See:

http://www.roadtoroota.com/public/146.cfm

Looking at events like MF Global, the London Whale Trade, Cyprus bail-ins, etc, one can clearly see the rule of law is essentially gone protecting the average person.  In a global financial crises I don't believe one will be able to get their metal out of depositories.   Either the govt or the banks can raid them with impunity is my guess in a real crises.  The depositories are easy pickings for the govt.   Also what will happen in a crises when that metal in the COMEX depositories is found to be re-hypothecated many times over.  I don't think my metal will be first in line for delivery against JP Morgan with any crises.

3. If you hold silver, the USGS says silver is essentially extinct by 2020 (7 years) because the cost will be too high to mine.  Before this happens, because silver is essential metal in industry and defense (it is in computers and airplanes, etc), I believe the govt will takes steps to confiscate supplies for  "national security" reasons because they won't have a replacement for it.  They will probably just raid the easy pickings, the depositories, and write you a check in my opinion.

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self directed ira and solo 401ks for precious metals

Regarding:

Sorry a little late to the discussion.  first off, I am in process of creating a self directed IRA.  i have an existing employer sponsored 401k which I will roll over to a US custodian who will in turn transfer funds into an LLC owned by the custodian but managed by me.  My primary motivation is to allow more flexibility in investments I chose – i.e among other things - PM’s.  that said I do not have strong financial background and mainly reading on my own

My advice is to exercise due diligence and research vendors that will set this up for you and also provide yearly updates for IRS changes for a small yearly fee and also help you file yearly IRS forms.  Don't try to set up the LLC on your own because if you get it wrong, the entire amount will be considered a distribution and incur penalties and early withdrawl fees.

Here are 3 I have talked to and can't find anything wrong with:

http://www.irafinancialgroup.com/ (both IRA LLC and Solo 401ks by tax attorneys)

http://www.mysolo401k.net/ (Solo 401k vendor only)

http://www.checkbookira.com/ (IRA LLC vendor only)

Again, I would suggest if you have a small business or hobby you set up a Solo 401k because it has much more advantages and lower cost than dealing with custodians and LLCs.

I wrote up questions in order of priority and called each vendor and each of them took the time to answer them thoughtfully.

Good luck.

 

 

 

 

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billding wrote: “In the case
billding wrote:

 

 “In the case of gold and silver, since the metal will be owned by the LLC and not by the IRA custodian, you will be limited to American Eagles and Buffaloes. But you are free to buy them from any source that is not related to you, and you can store them in whatever way you think is best – in a safe deposit box, under the floorboards at home, or in the back of your refrigerator. And they don't need to stay or even be purchased in the US.” I 

 

If you choose to hold gold or silver coins within an LLC or solo 401k you are not limited to American Eagles and Buffaloes. Canadian gold and silver Maples among others are also acceptable. Remember, all that matters is the number of ounces. Why pay a premium for US Gold and Silver Eagles? Also, if you decide to move to Canada, US coins will be taxed whereas Maples will not.

http://www.broadfinancial.com/gold-precious-metals

I agree with your sentiments on vaulting. While there are absolutely valid reasons to vault, it is expensive and questionably accessible and/ or secure in a crisis. Some local bank managers also tend to talk about what's in their safety deposit boxes. The most trusted individuals I've spoken with on my educational journey all seem to agree on one point when it comes to metal: If you can't hold it, you don't own it. 

Lastly, if you have your own business, the solo 401K is the way to go. It's cheaper and easier, both to set up and from a reporting standpoint. For less intrepid individuals that don't work for themselves, the IRA:LLC (Checkbook IRA) is probably the best and most flexible option. Pay to have a reputable lawyer set it up as previously discussed. Use a reputable bare bones custodian like IRA Trust Services ( iraservices.com) and save your money for coins. If you're reading this thread you're savvy enough enough to know there's an expensive and much less expensive way to setup these vehicles and manage them. The difference is simply a function of education.

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Precious Metals coins at a discount

You can buy Gold and Silver eagle coins at a discount through spoteaglesdotcom.

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SilverDad
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IRAs and Silver Eagle coins

You are allowed to have Silver Eagle coins in your IRA portfolio. 

If you are interested in buying Silver Eagle coins, you can get a limited amount at spot with spoteaglesdotcom.

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The difference between Self Directed IRA vs. Solo 401K?

Hi, I am interested in setting up some sort of self directed IRA or 401K to buy gold so I can hold on to them instead of keeping it in the custodian vault...  I was leaning toward a company I found and their name is Checkbook IRA.  However, I did not know that you can do the same with 401K...

My understanding is that once you contribute to an LLC to purchase gold, then you can't continue to contribute to the LLC.  Is that correct?  Will solo 401K allow me to keep on aking contribution?

Can someone please enlighten me on the difference between Solo 401K and SD LLC?

Thanks in advance..

 

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Re: The difference between Self Directed IRA vs. Solo 401K?

Manicorp,

You should find most of your answers on this site:

http://www.pgiselfdirected.com/

An IRA requires a custodian, a 401K doesn't. So you don't need to setup a LLC to have full control of your money in the case of a 401K.

There is a FAQ and a number of videos if you follow the link above.

Hope this help!

Fred

 

 

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t is different with an

t is different with an individual 401(k). In that situation the account holder, as trustee of the individual 401(k) plan, could be in physical possession of the metals. However with an IRA that is not the case. Many providers pitch the idea of using an LLC to alleviate this issue however the rules that apply to the IRA will apply to the LLC that the IRA is the sole member of... so you are left with the same issue.

 

 

we like  fifa 15 coins without reason

Go to our home page:http://www.fifautc.co.uk/
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Tom From RI
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More questions on self-directed PM IRAs and the LLC option

Hi All,

I've been reading on this topic for awhile now, and have to admit my head is spinning a bit. wink

I have looked into two companies actively advertising the option for an individual to roll their IRA into a self directed LLC setup which allows you to then take physical possession of the IRS approved metals you buy.

One is Augusta Home Storage Gold IRA, and the other is Kingdom Trust.

For KT as an example, they state they have $5B in assets under management with 50K+ clients.

Their process is you pay $1200 for the initial LLC trust setup, then $88/year maintenance fee.

You can then rollover your IRA, buy IRS approved coins and take physical delivery.

Couple of questions:

1) Has anyone successfully done this yet, and it yes which firm out there did you use?

2) Do you have to roll over your entire IRA, or can you do a portion of it (i.e. not all eggs in one basket?)

Thanks in advance for your insights,

Tom

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Ken Joshmen
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Home Storage Gold IRA

I looked into Augusta, but they are a  relatively new company, which makes me feel uneasy. So I went with Capital Gold Group-  who has been around and have been recommended to me by associates in the past I have been really happy and would recommend you look at them before you look anywhere else.

 Hope this helps

 Ken Joshman

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Time2help
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Home Storage Gold IRA??
Ken Joshmen wrote:

Home Storage Gold IRA

WTH does that mean? "Please Rob Me Now Gold IRA"?

You, Sir, need a boat.

Perhaps a model such as this...and don't forget a Ukulele.

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