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Can I Hold or Store Precious Metals owned by a Self Directed IRA in a Safe Deposit Box?

Internal Revenue Code Section 408(m) states:
Investment in collectibles treated as distributions.
(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.
(2) Collectible defined.
For purposes of this subsection , the term “collectible” means—
(A) any work of art,
(B) any rug or antique,
(C) any metal or gem,
(D) any stamp or coin,
(E) any alcoholic beverage, or
(F) any other tangible personal property specified by the Secretary for purposes of this subsection .
(3) Exception for certain coins and bullion.
For purposes of this subsection , the term “collectible” shall not include—
(A) any coin which is—
(i) a gold coin described in paragraph (7) , (8) , (9) , or (10) of section 5112(a) of title 31, United States Code ,
(ii) a silver coin described in section 5112(e) of title 31, United States Code ,
(iii) a platinum coin described in section 5112(k) of title 31, United States Code , or
(iv) a coin issued under the laws of any State, or
(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.
– Internal Revenue Code Section 408(m) identifies what types of coins and precious metals are permitted to be purchased using an IRA
– Section 408(m) also states that the bullion must be held in the physical possession of a trustee described under subsection (a)
• The “Physical possession” requirement only applies to bullion not approved coins
• A trustee is defined in 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.
• 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 541 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 can not be held in a foreign bank account since it would not satisfy the definition of bank.

Holding or Storing Precious Metals

The question then becomes what does “physical possession”
• 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. Thus, if a an IRA holder holds precious metals 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 metals are certainly not in the physical possession of the iRA holder. They are being stored in the bank, although, in a safe deposit box which is in the control of the IRA holder, but not possession. In other words, the metals are arguable in the possession of the bank since they are being held in the bank, although they are not in the control of the bank. From a legal standpoint, possession is not defined to represent control, meaning one can be in possession of an item but not control or ownership. Hence, many tax practitioners take the position that holding metals in a safe deposit box in the name of the Self Directed IRA LLC connotes satisfies IRC Section 408(m) required of “physical possession”.
The IRS has not offered any clear guidance on this issue, but what is clear is that the metals should not be stored in the home or possession of the IRA holder or any person that does not satisfy the definition of trustee pursuant to the Internal Revenue Code.
For more information on the ability to hold metals owned by a Self Directed IRA in a safe deposit box at a U.S. bank please contact an IRA expert at 800-472-0646 or visit www.irafinancialgroup.com

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