Buying Coins with Self Directed IRA LLC

ProofCollection

I have setup a self-directed IRA. I then started a single-member LLC and invested my IRA into the LLC and opened a checking and a savings account for the LLC. Now my LLC can theoretically invest in anything it wants to (real estate, secured loans to third parties, etc.), subject to IRS rules.

My interpretation of IRS pub 590 is that it is OK to buy any common, non-proof, US gold coins (particularly common date gold), including American Indians, St. Gaudens, and Liberties.

Does anyone here know for sure if that's acceptable? Those coins are all US legal tender and are more-or-less bullion. Would it matter if the coins were MS61-MS63 and certified? I know I'll have to buy them from a dealer (instead of eBay or private party), and they'd probably need to be sold to me as generic "$20 Liberty gold coin" rather than "1899 $20 MS-63 Liberty."

Excerpt from IRS publication 590:

If your traditional IRA invests in collectibles, the amount invested is considered distributed to you in the year invested. You may have to pay the 10% additional tax on early distributions, discussed later.

Collectibles. These include:
• Artworks,
• Rugs,
• Antiques,
• Metals,
• Gems,
• Stamps,
• Coins,
• Alcoholic beverages, and
• Certain other tangible personal property.

Exception. Your IRA can invest in one, one-half, one-quarter, or one-tenth ounce U.S. gold coins, or one-ounce silver coins minted by the Treasury Department. It can also invest in certain platinum coins and certain gold, silver, palladium, and platinum bullion.

Notice how they differentiate US gold coins and then specify gold bullion as two seemingly separate animals.

By the way, I'm just wanting to invest a small portion of this IRA in gold and silver which is why I went to all of the trouble to set this up - I have other investments planned also.

jdillane

I hope you can!

Mercury10c

I've occasionally read articles about this subject, and the rules are a bit hazy, but the experts recommend sticking to
gold and silver eagles. ICTA has published numerous articles on this. Check them out. ICTA

Longacre

What's with all of these tax questions lately?

ProofCollection

I would hope that because the rules are hazy, and (at least I hope) that my interpretation is *reasonable*, and my intent is to comply with the rules, that I would not have any problems. I might just have to roll the dice...

Joflax

My understanding is that all the collectibles, whether they be bullion or classic coins have to be kept in a depository (you cannot keep them at home or even see them )
You buy the coin and the depository pays the vendor and the vendor delivers them to the depository.
You can read about it at Apmex.com and tulving.com

Frankcoins

I believe you would run afoul of the "seal-dealing" restrictions if you want to have your own IRA invest in an LLC controlled by you.

Bothuwui

A Self-Directed IRA can invest in your own single member LLC. There's a good book on the subject titled "IRA Wealth" by Patrick Rice. It focuses on doing it to buy Real Estate, but all the same rules should apply for bullion. Chapter 9 covers it well. Basically, your IRA becomes a member in the LLC along with you. It has rights just like any other member. The IRA Administrator acts kind of as a guardian for the IRA's membership.

roadrunner

I would think it would only be US eagles and not $20 Libs or Saints.
It all makes good sense since the eagles sell for a smaller premium and are current products supporting the US mint (ie the govt). It's easier to value the eagles and dispose of them instantly to any thousands of dealers. Not quite so with the early $20's. And what easier way to possibly confiscate those eagles down the road by requiring that you buy only those.

If a depository holds your stuff and the sh!$ hits the fan, you want your gold a lot closer to home than that.

roadrunner

DMWJR

"Notice how they differentiate US gold coins and then specify gold bullion as two seemingly separate animals"

Not all gold coins can be classified as gold bullion, and not all gold bullion can be classified as gold coins.

bluespaceant

ProofCollection

<< <i>

<< <i>By the way, I'm just wanting to invest a small portion of this IRA in gold and silver which is why I went to all of the trouble to set this up - I have other investments planned also. >>



Wouldn't it be more efficient to put the IRA money in GLD, SLV, or CEF? >>



My other self directed IRA is already invested in those ETF's. My IRA LLC does not have a brokerage account, and I don't plan to open one with it.

oreville

ProofCollection:

Am I correct in assuming that your IRA is a 100% member of your LLC?

Or did I "read into" your statement that your IRA account is less than a 100% member?

When you sell the gold coins, are you issuing your IRA member account a K-1 form or not (as no distribution but yet a transaction that has occurred) since you are a single member LLC?

Are you planning on issuing annual form 5498 to your IRA for the FMV disclosure?

Also, many states charge excessive annual taxes/fees for LLC. It is becoming a problem in some states but not others.

Last question; did it cost you a few bucks to form the LLC? Did the IRA account pay for forming the LLC?

=====

My thought: Unless you are doing this with more than $20,000 IRA funds, the additional paperwork and fees can outweigh the benefits????

Look forward to your comments

ProofCollection

<< <i>ProofCollection:

Am I correct in assuming that your IRA is a 100% member of your LLC?

Or did I "read into" your statement that your IRA account is less than a 100% member?

When you sell the gold coins, are you issuing your IRA member account a K-1 form or not (as no distribution but yet a transaction that has occurred) since you are a single member LLC?

Are you planning on issuing annual form 5498 to your IRA for the FMV disclosure?

Also, many states charge excessive annual taxes/fees for LLC. It is becoming a problem in some states but not others.

Last question; did it cost you a few bucks to form the LLC? Did the IRA account pay for forming the LLC?

=====

My thought: Unless you are doing this with more than $20,000 IRA funds, the additional paperwork and fees can outweigh the benefits????

Look forward to your comments >>



I'll see if I can answer...

1. My IRA is the only member of the LLC.
2. I am not sure about the K-1. I don't think this will be necessary, but I don't plan to sell for a few years, I will have to find out then.
3. IRS Form 5498... not sure. I'll run this by my accountant. Do you know if I need to?
4. My state (arizona) doesn't have any taxes and fees for LLC.
5. It cost about $150 or so to form the LLC with the state and the publishing of articles, it was a few hundred more for a proper operating agreement to be drawn up, and a few hundred more for the IRA custodian (plus the IRA custodian gets a fee every year).

Yes, the amount is well over $20k. The main purpose of the IRA is to invest in things like real estate and other things you can't do with a normal 401k. But there's probably going to be a little bit left over, and I figure I might as well put it in gold & silver.

BlindedByEgo

Good sweet Jesus - looking for complex tax answers on a coin board? Good luck.

Deadhorse

I looked into this a few years ago as I am incorporated as a precious metals dealer. I am not just an LLC.

I did that in advance of the coming Patriot Acts and for a few tax benefits. When I looked into putting away gold bullion coins into an IRA to put off taxes for a future date when my income would be less, I learned that I had no control of the account once I put items into it. Not without severe penalties anyway. Further, I could not have any control over the bullion coins till retirement age. I also had to pay storage fees, administrative fees, and fees with absurd names that served no purpose but to drain my pockets. It became such a nightmare of paperwork, that I gave it up. Now it just sits as "inventory" in my own bank deposit box. I'll deal with profits when sale time comes. My CPA/tax attorney and I worked on this for a few months on and off and I finally just said it.

I found that there were so many restrictions, including the amount I could defer from taxes that it just wasn't worth it. I can do it as inventory and hold it the same way with none of the hassles.

The IRS really puts the clamps down on these things and simply doesn't want you to have any control over your IRA. Just another example of the Feds keeping control of regular folks.

I suppose it would be fine if you had an employer that would match funds, though inflation will eat it into swiss cheese by the time you can retrieve it. When you try to do it yourself, they tend to frown on such individual endeavors.

ProofCollection

Nothing in IRS publication 590 says anything about that.

I think some people are getting things confused. There is a way to buy bullion with your IRA (which involves another company, never physically owning the material, etc)... and then there's investing your IRA into your own company (a single member LLC). Then your company is free to invest in whatever you'd like just like any investment company would (subject to the regulations). Like any IRA though, you can't touch any of the profits or assets until retirement age without penalties.

roadrunner

It may come down to the fact that stuff like that is so regulated, and it will be hard to get to your US bullion coins when you really need to. It's easier and probably safer just to hold them yourself. A bird in the hand as they say. I believe that's part of the philosophy of being a coin collector.

roadrunner