Page 103 - TaxAdviser_2022

TAX TRENDS

Analysis of and reflections on

recent cases and rulings.

Author: McNulty, who exercised sole control
James A. Beavers, CPA, CGMA, Employee Benefits & Pensions over her IRA’s investment decisions,
J.D., LL.M. funded the IRA through direct transfers
Taking possession of coins from two qualified retirement accounts
in IRA causes a taxable she owned: an individual retirement
distribution annuity and a 401(k) account. She trans-
A taxpayer who purchased American ferred $378,487 from the annuity to her
Eagle coins through a self-directed IRA, IRA during 2015 and $48,375 from the
A taxpayer has had the coins delivered to her, and stored 401(k) during 2016 to purchase member-
taken a distribution the coins in a safe in her home received ship interests in Green Hill. McNulty did
not report any part of these transfers as
taxable distributions from the IRA equal
from a self-directed to the coins’ cost. gross income.
IRA if he or she Background After the IRA purchased the interests,
takes physical Donna McNulty wished to invest her McNulty, as Green Hill’s manager, had
the LLC use almost all of the funds from
possession retirement savings in American Eagle the membership interest sale to purchase
of IRA assets; (AE) coins through a self-directed AE coins from Miles Franklin Ltd.,
IRA. To this end, in 2015 she engaged
an authorized coin dealer. The money
the immediate the services of Check Book IRA LLC, to purchase the coins was transferred
supervisor who which advertised that a limited liability to Miles Franklin from Green Hill’s
must approve company owned by an IRA could invest bank account, and the invoices for them
showed Green Hill as the purchaser.
in AE coins and IRA owners could
IRS penalties is hold the coins at their homes without However, the shipping labels for the
the person who tax consequences or penalties so long as coins purchased identified McNulty
the coins were “titled” to an LLC.
individually or along with her IRA as
directly supervises With the assistance of Check Book, the recipient of the shipments. In 2015,
the work of the McNulty established a self-directed the IRA purchased 320 AE one-ounce
gold coins for $374,000, and in 2016 it
IRA with Kingdom Trust Co. as cus-
examining agent in todian and set up Green Hill Holdings purchased 2,000 AE one-ounce silver
an examination. LLC, a single-member LLC with the coins, four one-ounce AE gold coins, two
IRA as the sole initial member and one-quarter-ounce AE gold coins, and
McNulty and her husband as manag- one one-tenth-ounce AE gold coin for a
ers. McNulty transferred funds to total of $37,380. PHOTO BY ARCHEOPHOTO/ISTOCK
the IRA by purchasing Green Hill McNulty had the coins shipped to her
membership interests. The IRA then home and stored them in a safe there. Al-
purchased AE coins using the funds though the safe also contained AE coins
from those purchases. purchased with funds from sources other

56 February 2022 The Tax Adviser