It appears some bullion dealers have been promoting a structure whereby an IRA owner sets up a self-managed limited-liability company (referred as a “Checkbook LLC”) which purchases bullion and stores it in the IRA owner’s home, claiming that it is compliant on the basis that the IRA is indirectly investing in bullion through the Checkbook LLC.
ITCA notes that the IRS has recently provided guidance that the rule that bullion must be stored with a bank or IRS-approved trustee applies to indirect acquistions, meaning that such “Checkbook LLC” structures “run the risk of disqualifying the IRA because of the prohibited transaction rules against self-dealing”.
Separately, we have noticed that some offshore bullion dealers have been using phrasing that “there are no reporting requirements”, implying that precious metal stored with them are non-reportable by the investor, when in fact the the wording is really only saying that the dealer does not have to report.
US investors should be aware that precious metals are reportable under these IRS and FinCEN foreign asset/account obligations:
- Form 8938, Statement of Specified Foreign Financial Assets; and
- FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR);
if the vault operator has unrestricted access to the metal. Only if the precious metal is under the exclusive control of the investor (for example, a safety deposit box for which only the investor holds the key) would the holdings avoid reporting.
See this analysis by Michael DeBlis, III for more information on the reporting issue.