Gold and Precious Metals in a Self Directed IRA

Gold and Precious Metals in a Self Directed IRA

Background

Section 408(m)(1) of the Internal Revenue Code states that an IRA is prohibited from purchasing “collectibles”. Further in the IRC (Section 408(m)(2)), the term “collectible” is defined and numerous examples are given. These include artwork, antiques, stamps, rugs, and coins.

In 1986 when the US Government started minting American Eagle coins – in gold, silver, and platinum – they wanted to enable all taxpayers to purchase and hold them in their IRAs. As such, they added a new paragraph to the code, Section 408(m)(3)(A) which made a clear exception for these three specific American Eagle coins.

Several years later, during the time of NAFTA (the North American Free Trade Agreement) Canada wanted to get in on the action too, “If IRAs can hold American Eagles, why can’t they hold Canadian Maple Leafs?” they argued. The United States capitulated and added Section 408(m)(3)(B) which broadly expanded the types of coins and bullion that can be held in IRAs.

Coins vs. Bullion

The term “coins” is very specific and refers to coins minted by a government, while the term “bullion” is more general and includes “bullion coins” (coins minted by a government) and “bullion bars” (bars produced by a manufacturer accredited by NYMEX, COMEX, or the like).

Acceptable Coins and Bullion

Section 408(m)(3)(A) allows IRAs to purchase and hold American Eagle coins in gold, silver, and platinum.

Section 408(m)(3)(B) defines what other bullion coins and bullion bars are allowed to be purchased and held in an IRA. Instead of describing specific coins or bars, it provides broad parameters. In short, any coin or bar minted by a government or produced by a manufacturer accredited by NYMEX, COMEX, or the like and meets fineness criteria is acceptable. The fineness criteria for gold is 99.50 %, for silver 99.90%, and for platinum 99.95%. One additional requirement is that the metals be held by a bank, trust company, or authorized custodian.

It is interesting to note that 24-karat gold is 100% pure, while 22-karat gold is only 91% (22/24) pure. This is why some governments’ gold coins are acceptable (those that are 24-karat) and others are not (those that are 22-karat or less). Here is a partial list of acceptable coins and bullion:

Gold
American Eagle coins, U.S. Buffalo Bullion coins, Canadian Maple Leaf coins, Austrian Philharmonic coins, Australian Kangaroo/Nugget coins

Silver
American Eagle coins, Canadian Maple Leaf coins, Austrian Vienna Philharmonic coins, Australian Kookaburra coins, Mexican Libertad coins

Platinum Bars
American Eagle coins, Canadian Maple Leaf coins, Australian Koala coins

Bullion
Bullion is an acceptable investment as long as the following criteria are met: The fineness of the bars must meet material specific levels: .9950 for gold, .9990 for silver, and .9995 for platinum and palladium.
The bars must be fabricated by a COMEX or NYMEX approved refiner.

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