Checkbook IRA LLCs and Precious Metals: What the Courts Said

Some sellers market a "checkbook IRA" as a way to hold gold or silver yourself. The idea is that an LLC owned by your IRA buys the metal, and you manage the LLC. This page explains how that structure works, what the Tax Court said about it, and which IRS rules apply. It is general information, not tax or legal advice. Several points below are interpretations of court and IRS language, and they are labeled that way. A tax attorney should review any real plan. For the wider topic, see our Gold IRA Rules guide.

What is a checkbook IRA LLC?

"Checkbook IRA" is a marketing label, not a term we found defined in the IRS pages or statutes reviewed for this article. It generally describes this setup:

1. You open a self-directed IRA with a custodian. (A custodian is the bank or approved company that holds the IRA.)
2. The IRA buys all or most of the ownership units of a new LLC.
3. You are named manager of the LLC.
4. The LLC opens a bank account, and you write checks from it to buy assets.

In the case below, the LLC's articles described it as "a single-member LLC that is a disregarded entity for Federal tax purposes" (McNulty opinion). "Disregarded" is a tax-filing label. The court wrote that "resolution of the issues here does not depend on Green Hill's status as a disregarded entity or its separate legal existence."

Does the IRS have a special rule for IRA-owned LLCs holding metals?

In the sources we opened, the key rules are general ones. They apply to any IRA, whether or not an LLC is involved.

The IRS collectibles page also lists certain coins described in 31 U.S.C. 5112 and state-issued coins among the exclusions. It states the trustee-possession condition only for the bullion exclusion. Whether and how that condition applies to coins is a point the Tax Court addressed, as covered next.

What did the Tax Court say about an LLC holding coins at home?

The key case is McNulty v. Commissioner, 157 T.C. No. 10 (Nov. 18, 2021). We cover it in depth in McNulty v. Commissioner. Here are the facts that matter for the LLC structure, taken from the opinion.

• Mrs. McNulty's IRA bought membership units in Green Hill Holdings, LLC in 2015 and 2016. The opinion notes the parties disagreed whether she or her IRA was the sole member.
• Both spouses were Green Hill's managers.
• Mrs. McNulty instructed the IRA's custodian to transfer the purchase price of the units, and the custodian wired the money to Green Hill's bank account. The opinion says the custodian "did not have any role in the management of Green Hill," the coin purchases, or the administration of the assets.
• Green Hill bought American Eagle gold and silver coins from Miles Franklin, which the opinion calls "an authorized coin dealer." The opinion states the amounts: $374,000 in gold coins in 2015, $37,380 in silver coins in 2016, and a $6,746 payment in 2016 for gold coins plus insured shipping (the coins themselves cost $6,731).
• The opinion states: "The coins were shipped to petitioners' personal residence and were stored in a safe there".

The petitioners argued that "the AE coins were assets of Green Hill," so her physical receipt of them was not a taxable distribution from her IRA. The court disagreed. It held that "Mrs. McNulty's possession of the AE coins is a taxable distribution," and that the result held "irrespective of Green Hill's purported ownership of the AE coins." It reasoned that she "had complete, unfettered control over the AE coins and was free to use them in any way she chose."

How did the court read the bullion and coin exception?

The petitioners relied on the statute's exception for certain coins and bullion. The court wrote that the flush text of section 408(m)(3) "does not create an exception to the custodial and fiduciary requirements of section 408(a)." The opinion describes the IRA rule as requiring that "the IRA be a trust that is administered by a trustee that acts as a fiduciary."

Our interpretation: the court treated the coin exception as saying which metals are not collectibles. It did not treat that exception as allowing the owner to hold the metal outside the IRA's trustee or custodian arrangement. A tax attorney can say how far that reading reaches in a different set of facts.

What penalties applied?

The court also sustained accuracy-related penalties under section 6662(a). It found the couple did not show reasonable cause or good faith. It described their research as vague, said the website of the company that helped form the LLC was "an advertisement of its products and services," and noted they did not disclose the coin possession to their CPA.

What does this mean for the "home storage" claim?

Some marketing says an IRA-owned LLC lets you keep IRA metals at home without tax consequences. In McNulty, the opinion records that the company's website advertised that IRA owners could hold coins at home without tax consequences or penalties "so long as the coins were 'titled' to an LLC." The court still found a taxable distribution.

Our interpretation: the opinion does not say every LLC arrangement is taxable. It decided one set of facts, with the owner personally holding the coins. It does show that having an LLC in the middle did not change the outcome there. See storing IRA gold at home for more on storage rules.

How can the prohibited transaction rules apply?

A separate set of rules can matter in LLC structures. Under the IRS, "Prohibited transactions are certain transactions between a retirement plan and a disqualified person." The IRS page lists these examples for an IRA:

• Borrowing money from it
• Selling property to it
• Using it as security for a loan
• Buying property for personal use (present or future) with IRA funds

The statute, 26 U.S.C. 4975, also lists "use by or for the benefit of, a disqualified person of the income or assets of a plan." A disqualified person includes a fiduciary and certain family members. The IRS says that if an owner engages in a prohibited transaction, "the account stops being an IRA as of the first day of that year." Section 408(e)(2) describes this as treating the account as if it distributed its assets that day.

Our interpretation: this is a different rule from the one in McNulty. The distribution there came from taking possession of coins, not from a prohibited transaction. The opinion says the IRS conceded Mrs. McNulty "has not engaged in a prohibited transaction." Whether a specific LLC arrangement, such as the owner receiving pay for managing it or using its assets, involves a prohibited transaction depends on facts we cannot assess here. See prohibited transactions and self-dealing in a Gold IRA.

Common mistakes and edge cases

Related questions

Can a checkbook IRA LLC hold gold at home?

In McNulty, the Tax Court held that personal possession of coins bought through an IRA-owned LLC was a taxable distribution. We found no IRS or court source in our review saying home storage by the owner is allowed. A tax attorney should confirm how this applies to any specific structure.

Is a checkbook IRA LLC illegal?

We did not find a source calling the structure itself illegal. The opinion focused on possession of the coins. Other uses of an IRA-owned LLC raise separate questions under the prohibited transaction rules.

What is the cost if the IRS treats the coins as distributed?

The opinion measured the distribution by the coins' cost. Whether other taxes apply, such as an additional tax on early distributions, depends on the person's age and facts, so ask a qualified professional.

Where should I look next?

Start with Gold IRA Rules, then the McNulty v. Commissioner page. Key terms are defined in the glossary.