7706 / When a precious metal held within an IRA is sold, how is the transaction taxed?

Certain permissible precious metals may be purchased by the custodian inside a self-directed IRA. These precious metal assets will be exempt from all capital gains taxes if sold inside the IRA by the custodian, since the transaction is generally exempt from income taxation. Precious metals for IRAs may be purchased only by the account custodian, except in instances of transfers or rollovers (see Q 7702 concerning rollovers).

All contributions to an IRA must be made in cash. Distributions can be taken in-kind subject to the prohibited transactions rules and there is a 10 percent penalty for distributions taken prior to age 59½, and the required minimum distribution rules (RMD rules) apply to IRAs beginning at age 73 (72 for 2020-2022 and 70½ prior to 2020). Therefore, the desirability of such an investment must be weighed in light of the often confusing permissible precious metals investment and prohibited transaction and distribution rules compliance requirements, along with the reporting requirements and certain recent federal government proposals to place limits on these accounts. However, as of the date of publication, there are at least some IRA vendors in the U.S. purporting to provide and expertly handle certain precious metal purchases (with metal storage as part of the package) using the IRA as a vehicle.