Buying & Holding IRS Approved Precious Metals or Coins with Your Self Directed IRA LLC or Solo 401(k)

Thanks to significant advertising by precious metals dealers, it has become widely known that gold, silver, palladium bullion as well as certain coins can be purchased with retirement account funds. In fact, IRC Section 408(m) sets forth a list of approved precious metals and coins that are not considered “collectibles” and may be purchased with retirement funds.  Even though, IRC Section 408 generally deals with IRAs, section (m) applies to both IRAs and 401(k) plans.

By using a self-directed IRA or Solo 401(k) plan Precious Metalsto purchase IRS approved precious metals or coins, one is able to seemingly better diversify their retirement portfolio as well as generate tax-free gains on the sale of the metals or coins. More importantly, if you have full checkbook control over your Self-Directed IRA LLC or act as the trustee of your Solo 401(k) plan, the purchases can be made on the spot as fast as you can write a check.

IRA Financial Group, founded by leading tax attorneys, is one of only a handful of institutions that are skilled in helping clients establish IRS approved self-directed IRA and Solo 401(k) plans that can hold IRS approved precious metals and coins.

What Type of Precious Metals and Coins are IRS Approved Investments?

Internal Revenue Code Section 408(m) lists the type of precious metals and coins that are permitted investments using IRA funds:

In addition, the Technical and Miscellaneous Revenue Act of 1988 allowed IRA owners to invest in state minted coins so long as they are held in the possession of the IRA holder.

How do I hold IRS Approved Precious Metals or Coins in a Self-Directed IRA LLC or Solo 401(k) Plan?

Internal Revenue Code Section 408(m) identifies the types of coins and precious metals that may be purchased using a Self-Directed IRA.

Section 408(m)(3)(A) lists the type of coins that may be purchased with retirement funds, which generally are American Eagle and U.S. state minted coins of a certain finesse.  The Technical and Miscellaneous Revenue Act of 1988 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 must be held in the physical possession of a U.S. trustee, as described under subsection IRC 408(a).

A trustee is defined in Internal Revenue Code Section 408(a) as “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.” Internal Revenue Code Section 408(n) defines a bank as any bank (as defined in section 581) or an insured credit union (within the meaning of paragraph (6) or (7) of section 101 of the Federal Credit Union Act).
Section 581 defines a bank as a bank or trust company incorporated and doing business under the laws of the United States (including laws relating to the District of Columbia) or of any State, a substantial part of the business of which consists of receiving deposits and making loans and discounts, or of exercising fiduciary powers similar to those permitted to national banks under authority of the Comptroller of the Currency, and which is subject by law to supervision and examination by State, Territorial, or Federal authority having supervision over banking institutions. Such term also means a domestic building and loan association. The Code seems to suggest that metals cannot be held in a foreign bank account since it would not satisfy the definition of a bank.

The question then becomes what does “physical possession” mean and does the bank where the metals or coins are being held either physically or in a safe deposit box have to be the bank where the IRA was established or could it be any bank or financial institution that satisfies the definition of trustee under IRC Section 408.

How do I hold IRS Approved Bullion in a Self-Directed IRA LLC?

Internal Revenue Code Section 408(m) identifies what types of coins and precious metals (bullion) is permitted to be purchased using a Self-Directed IRA. Section 408(m) also states that bullion (IRS approved gold, silver, or palladium) must be held in the physical possession of a trustee described under subsection (a). Bullion is defined as gold bars, silver bars, other precious metals bars or ingots. Bullion is also used to refer to a metal piece shaped in the form of a coin or a bar and plated with a precious metal. The defining attribute of bullion is that it is valued by its mass and purity rather than by a face value as money. Examples are gold-plated bars and coins.Purchase IRS Approved Bullion or Precious Metlas

A trustee is defined in Internal Revenue Code Section 408(a) as 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.

Internal Revenue Code Section 408(n) defines a bank as any bank (as defined in section 581) or an insured credit union (within the meaning of paragraph (6) or (7) of section 101 of the Federal Credit Union Act).

Section 581 defines a bank as a bank or trust company incorporated and doing business under the laws of the United States (including laws relating to the District of Columbia) or of any State, a substantial part of the business of which consists of receiving deposits and making loans and discounts, or of exercising fiduciary powers similar to those permitted to national banks under authority of the Comptroller of the Currency, and which is subject by law to supervision and examination by State, Territorial, or Federal authority having supervision over banking institutions. Such term also means a domestic building and loan association. The Code seems to suggest that metals cannot be held in a foreign bank account since it would not satisfy the definition of a bank. The question then becomes what does “physical possession” mean.

IRC Section 408(m) clearly states that gold, silver, or palladium bullion must be held in the physical possession of a U.S. trustee, otherwise known as a U.S. bank or financial institution.

The safest approaching to holding IRS approved bullion is with an approved depository. However, many retirement investors have looked into potentially holding precious metals (gold, silver, palladium bullion) in a safe deposit box at a U.S. bank in the name of the Self-Directed IRA LLC is that in the “physical possession” of a U.S. trustee or bank. Well the argument goes that the precious metals are certainly not in the physical possession of the IRA holder since they will physically be held in a safe deposit box of the bank. Although, an argument can be made that the safe deposit box is constructively in the control of the IRA holder, since he or she has the keys for the box. However, the Internal Revenue Code under Section 408 clearly states “physical possession” and not “constructive control”. From a legal standpoint, possession is not defined to represent control, meaning one can be in possession of an item but not in control or ownership of. Hence, many tax practitioners take the position that holding precious metals in a safe deposit box in the name of the Self-Directed IRA LLC would satisfy the “physical possession” requirement under Internal Revenue Code Section 408(m).

The IRS has not offered any clear guidance on this issue, but what is clear, unlike IRS approved coins, is that precious metals should not be stored in the home or possession of the IRA holder or any person that does not satisfy the definition of a trustee pursuant to the Internal Revenue Code.

Do Not Hold IRS Approved Precious Metals/Bullion Personally

IRC Section 408(m) clearly states that gold, silver, or palladium bullion must be held in the physical possession of a trustee, otherwise known as a U.S. bank, financial institution or approved trust company.  Hence, IRS approved precious metals may not be held personally or anywhere outside of the physical possession of a U.S. trustee, as defined under IRC Section 408(a).  But what about IRS approved coins?

How to Hold IRS Approved Coins?

Can IRS approved coins, as described in IRC Section 408(m)(3)(A), be held Purchase IRS Approved Coinspersonally?  Unfortunately, there is not much IRS guidance on this point, but since coins may also be bullion, as defined in IRC Section 408(m)(3)(B), most tax practitioners take the position that IRS approved coins purchased by a retirement account should be held in the physical possession of a trustee, as defined under IRC Section 408. However, the Technical and Miscellaneous Revenue Act of 1988 does state that a retirement account may purchase state minted coins so long as a person holds them independent of the IRA owner. The 1988 Act does not define “Person” and interestingly does not refer to the term “trustee.” So can one hold IRS approved coins personally?  IRA Financial Group believes that IRS approved coins should not be held personally by the IRA holder and should be held in the physical possession of a trustee, as defined in IRC Section 408. That begs the next question; can a Self-Directed IRA LLC or Solo 401(k) Plan hold IRS approved coins and precious metals/bullion in a safe deposit box in the name of the LLC or Solo 401(k) Plan?

Using a Safe Deposit Box to Hold IRS Approved Coins Owned by a Self-Directed IRA LLC or Solo 401(k) Plan

In the case of a Self-Directed IRA LLC, IRS approved coins are purchased by the LLC manager in the name of the LLC, which is owned by the IRA, whereas, in the case of a Solo 401(k) Plan, the trustee of the Solo 401(k) Plan will purchase the coins for the benefit of the plan.  So where can the manager of the LLC or Solo 401(k) plan trustee hold the coins.  Clearly, the safest approach, and the approach we recommend to all of our clients, is for the coins to be held in the physical possession of a trustee, as defined in Section 408, such as a depository. But what about a bank safe deposit box in the name of the LLC or Solo 401(k) Plan?  Again, there is no formal IRS guidance on this point, but here are a few points to consider:

If a an IRA holder holds coins in a safe deposit box at a U.S. bank in the name of the Self-Directed IRA LLC the coins are clearly not being held by the IRA owner personally, which in the case of state minted coins would seem to satisfy the language in Technical and Miscellaneous Revenue Act of 1988. In the case of IRS approved coins that are not state minted, IRC Section 408(m)(3)(A) does not seemingly include a “physical possession” requirement, however, some IRS approved coins, such as American Eagles, can be considered bullion and could then fall under the ”physical possession” requirement under IRC 408(m)(3)(B) for bullion. Thus, holding IRS approved coins at a bank safety deposit box in the name of the IRA LLC or Solo 401(k) Plan is certainly not in the physical possession of the IRA holder since they will physically be held in a safe deposit box of the bank in the name of the IRA LLC or Solo 401(k) plan. However, the question, then becomes is the bank where the coins are being stored in the name of the LLC or Solo 401(k) plan considered the trustee of the IRA, as defined by IRC Section 408.

The definition of a U.S. trustee is outlined in IRC Section 408(a), which discusses the definition of an IRA.  So the argument goes if the IRS approved coins are held at a bank safe deposit box in the name of the LLC and the bank is not the trustee or the custodian of the IRA that holds the coins, then is the physical possession definition satisfied and is the bank acting as the IRA trustee?  There are arguments on both sides.  For example, IRC Section 408(m) also applies to 401(k) plans and the definition of a 401(k) plan trustee is not the same as a trustee of an IRA.  Since the physical possession requirement outlined in IRC Section 408(m)(3)(B) applies to IRAs and 401(k) plans, some tax practitioners believe that the definition is satisfied so long as the coins are held at a bank or financial institution that satisfies the definition of trustee, as outlined in IRC Section 408(m), and not necessarily the actual trustee of the retirement account.  The language in IRC Section 408(m)(3)(B) uses the term “a” trustee” and not the “the” trustee” offering some support for the position that the coins can be held at any trustee, as defined under IRC 408(a) and not just the trustee of the IRA.  This would make sense since a depository is considered a trustee pursuant to IRC Section 408(a), but may not be the actual trustee of the IRA owning the coins.

Using a Bank Safe Deposit Box to Hold IRS Approved Bullion Owned by a Self-Directed IRA LLC or Solo 401(k) Plan

In the case of IRS approved bullion, which may not apply to certain coins, does using a bank safety deposit box in the name of the IRA LLC or Solo 401(k) Plan satisfy the rules under IRC Section 408(m)? Unlike coins, IRC Section 408(m)(3)(B) clearly holds that the IRS approved bullion must be held in the physical possession of a trustee.  We have learned that a trustee is defined under IRC Section 408 as a U.S bank, financial institution, or approved trust company, including a depository.

If a an IRA holder holds IRS approved bullion, as defined under IRC Section 408(m)(3)(B) in a safe deposit box at a U.S. bank in the name of the Self-Directed IRA LLC or Solo 401(k) Plan is that considered to satisfy the definition of  “physical possession” of a trustee, as defined in IRC Section 408. Well the argument goes that the precious metals/bullion are certainly not in the physical possession of the IRA holder since they will physically be held in a safe deposit box of the bank. Although, an argument can be made that the safe deposit box is constructively in the control of the IRA holder, since he or she has the keys for the box. However, IRC Section 408 clearly states “physical possession” and not “constructive control”. From a legal standpoint, possession is not defined to represent control, meaning one can be in possession of an item but not in control or ownership of. Hence, many tax practitioners take the position that holding precious metals/bullion in a bank safe deposit box in the name of the Self-Directed IRA LLC or Solo 401(k) could satisfy the “physical possession” requirement under Internal Revenue Code Section 408(m)(3)(B).  However, the question, then becomes is the bank where the metals or coins are being stored in the name of the LLC or Solo 401(k) plan considered a trustee pursuant to IRC Section 408(a).

The definition of a U.S. trustee is outlined in IRC Section 408(a), which discusses the definition of an IRA.  So the argument goes if the IRS approved bullion/precious metals are held at a bank safe deposit box in the name of the LLC and the bank is not the trustee or the custodian of the IRA that hold the metals/bullion, then is the physical possession definition satisfied and is the bank acting as the trustee of the IRA which owns the metals.  There are arguments on both sides.  For example, IRC Section 408(m) also applies to 401(k) plans and the definition of a 401(k) plan trustee is not the same as a trustee of an IRA.  Since the physical possession requirement outlined in IRC Section 408(m)(3)(B) applies to IRAs and 401(k) plans, some tax practitioners believe that the definition is satisfied so long as the bullion/metals are held at a bank or financial institution that satisfies the definition of trustee, as outlined in IRC Section 408(a), and not necessarily the actual trustee of the retirement account owning the bullion/metals. The language in IRC Section 408(m)(3)(B) uses the term “a” trustee” and not the “the” trustee” offering some support for the position that the coins can be held at any trustee, as defined under IRC 408(a) and not just the trustee of the IRA.  This would make sense since a depository is considered a trustee pursuant to IRC Section 408(a), but may not be the actual trustee of the IRA owning the coins.

The Final Verdict

IRA Financial Group suggests that all clients seeking to purchase IRS approved coins or precious metals/bullion with their retirement account hold them in the physical possession of a trustee, such as a depository.  The IRS, as outlined in IRC 408(m)(3)(B) clearly does not allow any individual to hold IRS approved coins or precious metals/bullion personally, such as in their house. However, the Technical and Miscellaneous Revenue Act of 1988 Senate amendment seems to suggest that state minted coins can be held by a person other than the IRA holder, without referencing the term trustee, as defined in IRC Section 408.  Nevertheless, we recommend that IRS approved coins should not be held personally by the IRA holder and should be held at a trustee, as defined in IRC 408.

For Self-Directed IRA LLC or self-directed Solo 401(k) plan clients seeking to hold IRS approved coins and precious metals at a bank safe deposit box, we believe that this position has some risk, as the IRS has not offered any formal guidance. In the case of a Self-Directed IRA, if the bank where the safe deposit box is not the trustee of the IRA that purchased the metals or coins, an argument can be made that the metals or coins would not satisfy the physical possession definition outlined in IRC section 408 since the bank could not serve as the IRA trustee. This argument would seemingly not have much strength in the case of a Solo 401(k) plan, where an individual or individuals associated with the adopting employer would likely serve as the plan trustee and not the bank holding the plan’s assets, thus not creating any trustee relationship between the bank and the plan, but still satisfying the definition of a trustee under IRC 408.  In addition, the language in IRC Section 408(m)(3)(B) uses the term “a” trustee” and not the “the” trustee” offering some support for the position that the metals/bullion can be held at any trustee, as defined under IRC 408(a) and not just the trustee of the IRA holding the metals.  This would make sense since a depository is considered a trustee pursuant to IRC 408(a), but may not be the actual trustee of the IRA that owns the coins or bullion/precious metals. Nevertheless, the safest approaching to holding IRS approved coins or bullion/precious metals is at a trustee, as defined in IRC Section 408, such as an approved depository.  One thing that is clear, is the one should not ever hold IRS approved coins or precious metals/bullion personally.

In general, the rules surrounding the ownership and possession of IRS precious metals or coins are complicated.  Therefore, it is crucial that one works with a firm, such as IRA Financial Group, that has the expertise and resources to help one navigate the IRS rules without being preoccupied with selling you coins or precious metals.

IRA Financial Group is the market's leading provider of self-directed retirement plans. Founded by top law firm tax attorneys, IRA Financial Group has helped over 12,000 clients self-direct their retirement funds and invest over $3.8 billion in alternative assets, such as real estate and precious metals.

IRA Financial Group was founded by Adam Bergman, Esq. Prior to joining the IRA Financial Group, LLC, Mr. Bergman worked as a tax and ERISA attorney at White & Case LLP, Dewey LeBoeuf LLP, and Thelen LLP, three of the most prominent corporate law firms in the world .Mr. Bergman has written six books on the topic of self-directed retirement plans, including, Solo 401(k) Plan in a Nutshell,  Self-Directed IRA in a Nutshell, “The Checkbook IRA”,Going Solo,” Turning Retirement Funds into Start-Up Dreams, and in God We Trust in Roth We Prosper.

Please contact one of our IRA Experts at 800-472-0646 for more information.


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