Buying GLD or SLV in an IRA not allowable?

Discussion in 'Commodity Futures' started by DrPepper, Aug 28, 2009.

  1. I receive a free newsletter from a firm that does accounting for traders. I do not use the firm currently, but was very concerned about the information in the following newsletter. I trade ETFs in my IRA and trade GLD and SLV a lot, but this newsletter says that holding precious metals in an IRA is not allowed. Therefore, investing in GLD or SLV may be considered an early withdrawal! However, the newletter is a little confusing and I think that the third paragraph contradicts the second paragraph. Below is the pertinent excerpt from the newsletter:

    Bad News From IRS For ETFs

    Exchange traded funds that invest in metals do not qualify for the 15% rate on long-term capital gains. Instead their top top tax rate is 28%. it applies if the fund owned the metal for more than one year and the investor owned fund shares for over a year, IRS says privately. The fund's investors are deemed to own a share of the metal, such as gold, silver or platinum. The gain is treated as coming from the sale of a collectible.

    The IRS takes a different stance for IRAs investing in these funds. If the metal is held by an independent trustee, the Service will not treat the IRA as owning a share of the fund's underlying metal. This favorable interpretation keeps the IRA from running afoul of the rule barring direct investments in bullion.

    Although you can own almost any type of asset in an IRA, the IRS prohibits owning collectibles in an IRA, including metals and coins, except for certain kinds of bullion and certain coins minted by the U.S. Treasury. According to IRS Publication 590 , “If an IRA invests in collectibles, the amount invested is considered distributed in the year invested.” The account owner would have to pay a 10% penalty on the amount invested in a collectible since it would be considered an early withdrawal. Ouch! This makes it sound like owning precious metal ETFs in an IRA isn't such a good idea.
     
  2. Re-read, it's explained in this paragraph. It's fine.