When it comes to making investment with IRA funds, the IRS does not list the type of assets or investments that may be purchased with retirement funds but does indicate which categories of assets or investments are not permitted.
The types of transactions that are not permitted to be purchased using a Self-Directed IRA LLC can be found in Internal Revenue Code Sections 408 & 4975.
When it comes to coins or metals, Internal revenue Code Section 408 is generally the provision that applies. In general, collectibles such as artworks, rugs, stamps, certain coins, beverages and antiques, etc. are not allowed within a Self-Directed IRA LLC pursuant to Internal Revenue Code Section 408.
Internal Revenue Code Section 408 is specific as to what defines a collectible. Some notable exceptions are allowed for certain gold (such as American Eagle) and silver coins and any coins issued by a state. Legislation in 1997 (Technical and Miscellaneous Revenue Act of 1988 – TAMRA) further liberalized the rules for IRAs by making reference to specific definitions of acceptable coins in USCS, title 31; IRC sections 5112(a), (e) and (k); the Commodity Exchange coins that would not be treated as a collectible to “certain gold and silver coins issued by the United States Government.”
This change, in general, resulted in a windfall for individual collectors as well as coin and precious metal dealers (all of the coins allowed must be minted by the U.S. government or the states).
Below please find the relevant sections in Internal Revenue Code Section 408(m) that relate to purchase of coins:
(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
(iv) a coin issued under the laws of any State, or
31 U.S.C. § 5112 refers to Denominations, specifications and design of coins.
(a)The Secretary of the Treasury may mint and issue only the following coins:
(1) a dollar coin that is 1.043 inches in diameter.
(2) a half dollar coin that is 1.205 inches in diameter and weighs 11.34 grams.
(3) a quarter dollar coin that is 0.955 inch in diameter and weighs 5.67 grams.
(4) a dime coin that is 0.705 inch in diameter and weighs 2.268 grams.
(5) a 5-cent coin that is 0.835 inch in diameter and weighs 5 grams.
(6) except as provided under subsection (c) of this section, a one-cent coin that is 0.75 inch in diameter and weighs 3.11 grams
(7) A fifty dollar gold coin that is 32.7 millimeters in diameter, weighs 33.931 grams, and contains one troy ounce of fine gold.
(8) A twenty-five dollar gold coin that is 27.0 millimeters in diameter, weighs 16.966 grams, and contains one-half troy ounce of fine gold.
(9) A ten dollar gold coin that is 22.0 millimeters in diameter, weighs 8.483 grams, and contains one-fourth troy ounce of fine gold.
(10) and contains one-tenth troy ounce of fine gold.
(e) Notwithstanding any other provision of law, the Secretary shall mint and issue, in
quantities sufficient to meet public demand, coins which—
(1) are 40.6 millimeters in diameter and weigh 31.103 grams;
(2) contain .999 fine silver;
(3) have a design—
(A) symbolic of Liberty on the obverse side; and
(B) of an eagle on the reverse side;
(k)The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.
Therefore, American Buffalo coins are not treated as collectibles pursuant to IRC 408(m) and may be purchased using retirement funds, including a Self-Directed IRA LLC.
To learn more about purchasing and holding coins with a Self-Directed IRA LLC, please contact one our tax professionals at 800-472-0646