Precious Metals

Tax court rules on home storage IRA case

A November court ruling emphasizes the tax ramifications of holding bullion in your home, a practice discouraged by the National Coin & Bullion Association.

Image courtesy of National Coin & Bullion Association.

In a recent tax court case, Andrew McNulty et al. v. Commissioner of Internal Revenue, judge Robert Goeke ruled that the physical storage of $411,000 in American Eagle gold and silver coins in a safe at home constituted “unfettered control” of the investment and would thus be considered a taxable payout from the IRA in the amount of $411,000, the National Coin & Bullion Association reports.

According to NCBA, Donna McNulty argued unsuccessfully that she had opened a separate bank account in the name of an LLC, documented the purchase of the coins, and labeled the coins as the property of her IRA-owned LLC when depositing them into her home safe.

In a press release, NCBA writes, “For several years, false advertising in the form of television, radio, and internet promotions have suggested that buyers could store assets of gold and silver bullion coins in their own homes or safety deposit boxes as part of an IRA account. The advertisements often misinterpret IRS guidance that allows for two-step transactions, claiming that an investor could use a ‘checkbook LLC’ to circumvent enforcement of tax laws meant to prevent an IRA owner from direct possession of IRA assets.”

In response to inquiries, the IRS clarified its views on “home storage” and the use of an LLC, set up and self-managed by the IRA owner, to purchase and hold investments in gold and silver coins, warning that IRA owners cannot do indirectly what they cannot do directly.

The National Coin & Bullion Association (formerly known as ICTA) says it has long warned against the practice, including publishing a white paper on the subject in 2018, “The Prohibition on Home Storage of Bullion Held in an IRA.”

In that paper, NCBA explains in detail how this two-step process — setting up an LLC to “hold” gold and silver investments, which are then stored at home or in a safety-deposit box — is a violation of Section 408 of the Internal Revenue Code, and even used the exact same circumstances occurring in the McNulty tax court decision as a hypothetical case.

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