What Is IRS Code 408 M3?

Understanding Section 408(m) is central to understanding IRA regulations. Knowing it allows individuals to make investments that comply with IRS rules.

Investors using retirement funds to purchase coins and bullion can do so only if it will be physically held by an appointed trustee; while depository facilities technically fulfill this criterion, some tax practitioners disagree that depository facilities meet this criterion.

Precious Metals/Bullion

Precious metals and bullion have quickly become one of the more sought-after investments for Individual Retirement Accounts (IRAs). Individuals have turned to them as alternatives to stocks and bonds for retirement planning. But there’s one catch when using precious metals in an IRA: according to Internal Revenue Code 408m3, coins and bullion must be physically held by a trustee (traditionally this meant an approved depository facility but some investors are exploring holding onto them themselves).

Physical purchases of precious metals typically include coins or bullion bars in various sizes and shapes. Because precious metals are so resilient and hold their value well, they’re widely traded on commodity markets worldwide and represent an invaluable investment asset.


IRS Code 408 m3 and Technical and Miscellaneous Revenue Act of 1988 (“TAMRA”) has regulations for investing in coins and precious metals for Self-Directed IRA investors, but these investments must adhere to specific criteria as set out by these two statutes. According to these regulations, gold, silver and palladium bullion of certain finesse, as well as American Eagle and U.S. state minted coins of such finesse must be physically held by their trustee, usually an approved depository; bank safe deposit boxes do not necessarily fulfill this criteria defined under IRC section 408(a).

This issue could be resolved if coins and metals held by an IRA LLC itself were held physically by them – this would seem to satisfy the physical possession requirement – however most tax professionals believe the safest approach is for coins and precious metals/bullion to be stored with an approved depository as defined under IRC Section 408.

Safe Deposit Boxes

Safe deposit boxes provide the ideal place for valuables and hard-to-replace documents to be stored safely. Available through many banks, credit unions and financial brokers for rent on an annual basis, these storage solutions are a secure place where valuables can be kept out of harm’s way.

Contents in a safe deposit box are not insured by banks; however, some people choose to purchase additional coverage through private insurance providers. Access is typically only possible during banking hours.

As digital records become the standard, some may believe safe deposit boxes to be outdated. Yet as physical branches close across the country, these storage options still provide invaluable service if you have assets which need protecting away from home that cannot easily be digitized; such as power of attorney documents and living wills.


IRS Code 408 m3 can have wide-reaching ramifications and must be carefully understood in order to comply with its provisions and safeguard one’s assets in an IRA, such as collectibles and precious metals. Individuals seeking to buy such assets using an IRA should seek professional guidance so as to comply with IRS regulations while remaining aware of their unique financial situations.

An IRA should only hold coins and bullion/precious metals approved by IRS regulations at an IRC Section 408 trustee such as a depository. Any attempt at personal purchases (for instance through safety deposit boxes) violates IRS rules; similarly storing these items at personal addresses such as homes can lead to penalties totaling 10% for early distribution tax distributions.

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