By Adam Bergman
Thanks to significant advertising by precious metals and coin dealers, it has become widely known that gold, silver, palladium bullion, as well as certain coins can be purchased with retirement account funds. In fact, Internal Revenue Code (“IRC”) Section 408(m) sets forth a list of approved precious metals and coins that are not considered “collectibles” and may be purchased with retirement funds. Even though IRC Section 408 generally deals with IRAs, section (m) applies to both IRAs and 401(k) plans.
By using a self-directed IRA or Solo 401(k) plan to purchase Internal Revenue Service (“IRS”) approved precious metals or coins, one is able to seemingly better diversify his or her retirement portfolio as well as generate tax-free gains on the sale of the metals or coins.
IRC Section 408(m)(3)(A) lists the types of coins that may be purchased with retirement funds, which generally are American Eagle and U.S. state minted coins of a certain finesse. The Technical and Miscellaneous Revenue Act of 1988 (“TAMRA”) also allowed for the purchase of state minted coins. Whereas IRC 408(m)(3)(B), refers to gold, silver, or palladium bullion of a certain finesse which must be held in the “physical possession” of a U.S. trustee as described under subsection IRC 408(a), and which essentially refers to a U.S. bank, financial institution, depository, or approved trust company. Therefore, one should never hold IRS approved coins or precious metals/bullion owned by his or her retirement account personally, such as in his or her home.