7703 / Can a taxpayer hold precious metals in an IRA?

The list of precious metals that may be held in an IRA is specific and limited. Both life insurance and collectibles cannot be held in an IRA and, according to the IRS, “if you invest your IRA in collectibles, the amount invested is considered distributed in the year invested and you may have to pay a 10 percent additional tax on early distributions.” In effect, the transaction is treated as a premature taxable distribution. Therefore, investment assets in an IRA must be carefully selected, especially if they are precious metals.

Here are some examples of prohibited collectibles currently listed on the IRS website:

Artwork, metals (but there are exceptions for certain kinds of bullion that meet specific requirements), coins (but there are exceptions for certain coins that meet specific requirements), antiques, gems, alcoholic beverages, and certain other tangible personal property.¹

Planning Point: Despite this seemingly broad prohibition that looks to include precious metals, there are specific exceptions available for precious metal collectibles permitted in IRAs, but they are rather specific as one, one-half, one quarter, or one-tenth ounce U.S. gold coins, or one ounce silver coins minted by the US Treasury Department, An IRA may also invest in certain platinum coins, and certain gold, silver palladium and platinum bullion.² Permissible precious metals IRA investments may only be found in IRC Section 408(m).

More detailed information on an IRA investment in permitted and prohibited precious metals “collectibles” is contained in IRS Publication 590, Individual Retirement Arrangements (IRAs). According to IRC Section 408, an IRA may only include any “gold, silver, platinum, or palladium of a fineness equal to or exceeding the minimum fineness that a contract market (as described in section of the Commodity Exchange Act) requires for metals which may be delivered in satisfaction of a regulated futures contract.”³ Investors should always work with an IRA administrator/custodian experienced with permissible Section 408(m)(3) precious metals to avoid adverse tax consequences to the IRA, and its participant(s). Programs that promise the benefits of IRA investing but permit an investor to personally retain possession of the acquired permissible precious metal, as in a home safe, are unlikely to pass the IRS’s requirements for a valid IRA transaction and incur adverse income taxation.⁴