Can an LLC Hold Precious Metals?
Most trusted portfolios include tangible assets such as precious metals. But according to IRS rules, such investments require special tax considerations.
Physical precious metal investments don’t attract capital gains taxes like other investments do; short-term gains instead are subject to ordinary income rates, making an LLC an excellent way to minimize tax liabilities and protect retirement accounts.
Limited Liability
An LLC is an increasingly popular method for holding precious metals as it removes any issues related to home storage, making it possible to take ownership of physical precious metals instead of having them managed centrally by third-party companies.
However, this structure can easily be misconstrued. A recent McNulty case demonstrated this point. An IRA owned LLC purchased precious metals from Green Hill and stored them at the investor’s residence after which time the IRS found this to be noncompliance with rules.
Courts remain empowered to pierce through corporate veil and seek the assets of individual owners for judgments or debt repayments, so having a comprehensive asset protection plan in place to protect tangible assets like precious metals is imperative for survival.
Taxes
Precious metal investments offer many advantages for wealth preservation, value storage and portfolio diversification; however, it is important to keep one important tax consideration in mind when investing. Precious metals are considered collectibles by the IRS and could incur capital gains taxes upon sale.
An LLC’s assets are taxed at a “flow through” rate, meaning any gains will be reported as individual tax returns. To prevent tax penalties and reduce risks of potential violations, always keep documentation for purchases, sales prices and associated costs such as storage fees – these should all be added into your cost basis calculation.
Establishing an IRA owned LLC can also help reduce fees charged by Custodians. By handling the purchase of metals yourself and creating this entity, fees can be kept to an absolute minimum, and in many cases even eliminated altogether.
Asset Protection
An LLC provides significant asset protection benefits when used to hold precious metals – unlike stocks and bonds which could potentially be stolen from under you by creditors or devalued.
As with any business entity, an LLC remains vulnerable to legal threats from attorneys looking to breach its protective barrier and garnish personal assets for debt repayment or judgments. Therefore, it’s essential that an asset protection strategy includes your LLC as well as other entities.
Though storing precious metals directly through an LLC is possible, the associated costs and complexities can increase significantly, along with storage risks and tax implications. Secure locations must be found for storage as the IRS considers precious metals collectable assets which may attract higher capital gains taxes than other assets. It’s also crucial that adequate coverage exists on homeowner or renter policies so your collection remains uninsured.
Chain of Title
A chain of title is a record that verifies legal ownership rights to an asset and shows its history of transfer from owner to owner, helping settle ownership disputes between individuals or companies. Real estate buyers in particular should use chain of title information as part of their due diligence in purchasing property to avoid problems like liens or zoning restrictions.
A chain of title refers to public records that establish property ownership. Additionally, this may include other documentation like easements, CC&Rs, mortgages/deeds of trust, judgment liens, tax liens and death certificates which have an effect on claims for ownership of certain properties.
When investing in precious metals, it is best to purchase them through your LLC. This ensures your precious metals are secure from lawsuits or other risks; furthermore, purchasing through an LLC allows you to avoid using an IRA Custodian for these purchases and thus avoiding transaction fees that can become quite burdensome over time.
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