A Safer Retirement and Environment – What We’re Implementing to Help Keep You Safe: READ MORE

Here at Fortress Financial, we are adhering to state and local guidelines in order to protect both the health and safety of clients and staff. Keeping our clients and staff safe is our highest priority and we’re taking all appropriate measures to ensure a safe environment. Should you prefer to not meet face-to-face, we are continuing to serve our clients through virtual settings such as Zoom or phone calls.

We look forward to continuing to help individuals and families achieve their ideal retirements.

Fortress Financial
208-233-1685

CLOSE

 

PROCEED WITH CAUTION WHEN INVESTING YOUR IRA IN GOLD

By Sarah Brenner, JD
Director of Retirement Education

In volatile times like these, when inflation is looming, retirement savers may look to invest their IRAs in gold. Advertisements on the internet and cable tv make it look easy, but that is not the full story. The recent Tax Court case of McNulty v. Commissioner shows the risks to retirement savings if the rules are not carefully followed.

In this case, a Rhode Island nurse lost it all when the Tax Court ruled that her self-directed IRA investment in gold coins that she kept in her possession in her own house were a taxable distribution. To make matters worse for her, the Court also slapped her with an accuracy penalty for relying on internet research instead of a professional advisor.

While gold coin and gold bullion are acceptable IRA investments, there are strict rules that must be followed. An IRA owner who expects to hold gold coins in her hand, as suggested by some internet promotions, will be out of luck. The Tax Code makes it clear that if gold coins or bullion are to be held in an IRA, they must be in the custody of a qualified trustee or custodian.

In the McNulty case, Mrs. McNulty set up a self-directed IRA with an LLC which bought gold and silver American Eagle coins. She kept the coins in her home, and that was a fatal error. The Court found that a taxable distribution occurred when Mrs. McNulty took possession of the gold coins in her IRA. The entire investment was considered distributed and taxable. Her retirement savings was gone.

The Court also hit the McNultys with accuracy penalties. These penalties for underpayment of taxes can be avoided if a taxpayer acted with reasonable cause and in good faith. One way to do this is to seek professional advice. The McNultys admitted that they did not seek advice from their CPA. Instead, they looked to the website promoting the investment in gold. According to the Court, this website was an advertisement of products and services and not professional advice.

The McNulty case is a good reminder that many of those advertisements you may see about holding gold in IRAs can misleading. Many of them may lead you to believe that you can keep your IRA gold at home, maybe with the help of an LLC. This is a fatal mistake. If you take possession of the gold in your IRA, it’s a taxable event. Your savings are gone. The case also shows how free internet research can end up costing you a lot. Relying on information on a website can be a mistake because the IRS does not see this as seeking professional advice. Independent professional advice is critical, especially when it comes to alternative investments like gold.

https://www.irahelp.com/slottreport/proceed-caution-when-investing-your-ira-gold

Ready To Take

THE NEXT STEP?

For more information about any of our products and services, schedule a meeting today.

Or give us a call at 208-233-1685