Most retirement experts will tell you that real, hold-in-your-hand gold cannot be held in an IRA unless it is held in a state depository hundreds of miles away from you.
Hold your gold with an IRA LLC
Most IRA holders who own gold in this manner have never even seen their gold.
They only know that their custodian tells them that their gold is “somewhere safe”.
But the old saying “If you can’t see it, you don’t own it” rings in many an investors ears.
I’m here to tell you that it is possible for you to “be closer” to your gold, and see it every day if you wish.
Notice that I said “be closer” – I did not use the words “take physical possession”.
But if you consider “close” to be in the bank down the street from you so that you can see your gold anytime you want, then that’s what you can have.
See, Touch, & Feel Your IRA Gold With an IRA LLCAn IRA LLC is simply an LLC that you create to own your IRA investments. So it works like this: Your self-directed IRA owns your LLC which owns your gold.
An IRA LLC can allow you to “feel” like you have possession of your gold without technically possessing it.
Here’s the real crux of the “physical possession” issue…
Internal Revenue Code Section 408(m) states that gold bullion “must be held in the physical possession of a trustee described under subsection (a). “
A trustee is defined in Internal Revenue Code Section 408(a) as a bank, and IRC 408(n) defines a bank as any bank or an insured credit union.
OK, so far we’ve established that a bank can hold the gold of an IRA.
The question then becomes what does “physical possession” mean.
IRC Section 408(m) clearly states that gold bullion must be held in the physical possession of a U.S. trustee, otherwise known as a U.S. bank or financial institution.
Thus, the question then becomes, if an IRA owner holds precious metals in a safety 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 safety deposit box 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 in control or ownership of.
The IRS has not offered any clear guidance on this issue, but what is clear, 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.
The Technical and Miscellaneous Revenue Act of 1998 does not state that the third-party holding gold coins must be a bank, but the holder must not be the IRA holder.
Gold Coins in Your IRA LLCNow that you have a clear idea of how and why gold bullion can be purchased by your IRA and held in your bank, the next question becomes how can gold coins be held without violating IRS rules.
Unlike gold bullion, the Internal Revenue Code and the legislative history does not include a requirement that IRS approved coins be held in the “physical possession of a U.S. trustee.”
And so, it appears that IRS approved coins can be purchased by a Self-Directed IRA LLC and not be held at a depository or U.S. Bank.
However, it is recommended that you hold IRS approved coins in a bank safety deposit box, depository, or some sort of third-party vault in the name of the IRA LLC.
The reason for this is that when a disqualified person holds the gold, it puts the onus on the IRS holder, to prove that no self-dealing or conflict of interest event occurred in the case of an IRS inquiry.
The “physical possession” threshold seems to only apply to IRS approved precious metals under Internal Revenue Code Section 408(m), although the tax code does not state anywhere that the coins could be held in the possession of a disqualified person.
In summary, IRA LLC owners who want to “be close” to their gold, should hold IRS approved gold coins and bullion at a bank safety deposit box in the name of their LLC.