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centraltx
centraltx
12 years ago

From the legal withdrawal in a collapse standpoint, if you pay the early penalties in worthless currency, it seems like you could still really get screwed here. Rather than paying tax on 1oz of silver at $32 you might owe a tax bill at 1oz at $1 million (Zimbabwe) or some quantity you could never repay if precious metal transactions were made illegal. Maybe I haven’t fully processed this yet – what are your thoughts on this?

centraltx
centraltx
12 years ago
Reply to  centraltx

Right, I’m only considering this with money I have in a two IRAs, one traditional and one SEP. I figure this is the perfect avenue for keeping hard assets now that there is a PM option, since I’ve planned on doing this for some raw land as well, which would leave me more diversified.

I’m seriously considering doing this – but I have to be honest, I’ve looked at Kenny Parson’s site – it looks a little too 1999 for me. You’ve mentioned this exact issue with websites in the past, unprofessional sites turn people off. I know Rob said he trusts him implicitly, but Kenny doesn’t appear to have an real credentials when its comes to finances, law or accounting. The application forms requires a Social Security number and financial statements. This makes me very apprehensive…

centraltx
centraltx
12 years ago

One other concern I have is this list of disqualified parties (see here: http://www.iracentral.com/irablog/?p=25)

“Any entity (corporation, partnership, trust, etc) in which any of the above disqualified persons owns at least a 50% share (those with some ownership but less than 50% may still be prohibited).”

“An act by a disqualified person who is a fiduciary whereby he deals with the income or assets of the plan in his own interests or for his own account.”

This approach seems like you are walking a very tight line legally. If the IRS decides against you the penalties are very hefty. I know that transactions that benefit a Roth IRA that are found to be done trough proscribed methods can be fined up to $200k for the beneficiary and $100k for accountants attached, even if they were not party to it. I think professionals might be very wary of participating in this.

Don’t get me wrong, I would love to do this and will continue to research it, but I thought it would be helpful to warn people from jumping right into this (which Rob also advised).

If I find any further information one way or the other I will post it.

ib12541
ib12541
12 years ago

reasons not to do this:

a.) why would you want to defer taxes now only to pay at a higher rate in the future?

b.) potential legislation in the works that will redirect all retirement funds into government sponsored treasury accounts

c.) if you don’t hold it you don’t own it – ensure your metal doesn’t get hypothecated or leased

be safe and investigate all of the angles before you part with your hard earned cash

Jessie
Jessie
12 years ago

JM Bullion is offering a Buffalo Silver 1oz round minted by Golden State Mint which is now IRA legal, I believe. Another option other than Silver Eagles.

sheepdog
sheepdog
12 years ago

I setup this structure last year. Works extremely well. I would not recommend using a trustee company. Why involve a third party in your transactions. Only delays, limits and increases your expenses. You can act as your own trustee. You only need a custodian. Fidelity can act as your custodian but I would highly recommend you use a tax attorney (JD) to setup the proper structure and paperwork. The Fidelity account is free and you can have checkbook control to buy whatever you want within IRS guidelines (no prohibited transactions or self dealing).

Sunshine7
Sunshine7
12 years ago

There was a webinar broadcasted back in December of 2012, which talked about a very widely unknown problem with all IRA’s self-directed included.

I am no expert, but look this person up to find out about it.

Tonight… 9:00 PM ET… Is it Schwab? Is it Entrust? Is it Merril Lynch? Is it Fidelity? Is it another?

IRA’s are in serious trouble… and I.R.A. owners have no idea about this. You might prefer to think this is just sensationalism or fear mongering, but…

…can anyone fake court cases? Nope. You’ll see the very, very recent court cases tonight that prove, without any doubt, that I.R.A. owners are facing serious problems. You won’t be forced to take anyone’s word for it.

We get started at 9:00 PM ET. Click here to join us.

Thank you for being a subscriber to the Bryan Ellis Investing Letter (formerly “The Bryan Ellis Real Estate Letter”). This letter is sent on behalf of Galt Ragnar LLLP and is for educational purposes only. Some of the links in this email may lead to products/services for sale for which Galt Ragnar LLLP will be compensated. Nothing in this email is intended to form a contract or binding legal commitment. All content herein is copyright (c) 2012 Galt Ragnar LLLP.

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Ramsey Breitweiser
Ramsey Breitweiser
12 years ago

I have been thinking about Jack’s statement about paying an early withdrawal penalty in worthless currency in a collapse scenario since I heard it as well. It doesn’t really track for me, but I don’t think you would be any worse off post collapse as pre, and you are only really going to need to worry about the withdrawal penalties if there is some entity to actually enforce collection. Here’s how it seems to me; let’s say my LLC buys 3 oz. of silver for $100 and it sits in my LLC safe until the collapse. Now the dollar has become relatively worthless, but what it is relative to is hard currency such as silver. So now the 3 oz. of silver sitting in my safe is worth $10,000 on paper and it’s the paper value in the worthless currency that the IRS is concerned with when it figures out what withdrawal penalties are expected, so I’d owe the IRS the penalties and taxes on the $10,000 if I withdraw the 3 oz. Now, the nice thing is I’ve got hard currency to pay that if necessary, but I would want to use any of that worthless currency I might have first. So it seems like if the dollar has inflated catastrophically then the penalty will have as well, but you wouldn’t be any worse off after then before from the penalty perspective. (And that’s assuming you are worried about paying the penalty in that situation.)

centraltx
centraltx
12 years ago

Yes Jack, you can sell it at any price, but:

“It would be your responsibility (called “burden of proof”) to show that no significant benefit was conferred to either the disqualified person or your IRA. Failure to provide such proof could result in the disqualification of your IRA. [See Joseph R. Rollins v. Commissioner, T.C. Memo 2004-60.]”

“Claiming ignorance of the rules is no defense. [See Ralf Zacky v. Commissioner, T.C. Memo 2004-130.]”

I’m simply trying to be devils advocate here. I think this show could seriously screw people up if done improperly or by cutting corners or by doing thinking a government entity wouldn’t notice something being sold at deep discount – especially something which would be a hot commodity in such a scenerio. I’m not trying to be a dick, but advice or cute “workarounds” in this sphere needs to be very carefully given.

If a collapse happens and hyperinflation occurs, I do think saying the sale price was other than reality would be easier, since the currency would be in flux. But I wouldn’t count on being able to do this.

Aaron
Aaron
12 years ago

Here is an idea! Those who don’t want to do it, don’t have to do it! Those who do, getter done!

The point was that you can convert your IRA funds into something that could save your life. By switching to a self-directed IRA and going in silver or land, if the SHTF, you would have something that is worth something. You always risk the government kicking in your door and asking for their share, even if everything is perfectly legal. (We play by the rule, the government changes the rules).
When there is hyperinflation, I am sure the IRS is going to try to hunt down as many people as they can to pay the penalty and interest. However, the IRS has limited resources. The IRS cannot and will not find everything and everyone. In addition, the people who work for the IRS may not, if the money they are paid is worthless.

I will take the chance, I don’t have a lot of money in an IRA and if I can use it to save my family or myself down the road, so be it. If not I can look at shiny silver ever now and then. If the SHTF and I need to make a distribution, I will blame my trustee for mismanagement of my IRA.

John
John
12 years ago

A Google search quickly finds this:
http://selfdirectedira.org/

Any thoughts or experience?

john
john
12 years ago
Reply to  John

OK, after wasting time and money on a tax attorney and calling the above website, I guess the deal is you CANNOT access retirement funds if you are currently employed by the company through which you have the retirement account. Someone please tell me I’m wrong.

john
john
12 years ago

I was afraid of that.
Thanks for the reply Jack!

Ben
Ben
12 years ago

IRA….SCHMIRA….I would like to hear more about those 1/10th ounce oz. silver coins Rob is going to mint and sell at the same premium as 1 oz. coins! Oh yes..come to Papa! Thanks Jack…

Rutger
Rutger
12 years ago

Great show Jack. I am in Canada and almost turned it off because it was not very relevant to me, but was driving and there was nothing better to listen to. The 1/10 oz silver option at the end of the episode made it all worth while for me :-). That and I love the passion that Rob brings to this topic. He makes me go read our own laws just to see what is possible.

Maybe I am talking out of my rear, but could you not do this same method with guns and ammo instead of silver? I did not hear it on the “not allowed list” (unless I missed it).

Joe DuPont
Joe DuPont
12 years ago

Wow this show is worth the $50 bucks admission..

nate
nate
12 years ago

I was reading through the comments here, and I was reminded of what someone said on Zello a few weeks back. He basically said that he found it interesting that we declare, loud and round, “out of my cold dead hands” then we get all worried about law when discussing grabbing onto the back of a truck while on a bicycle to catch a lift up a hill.
Now, I’ve not had the “good fortune” of working somewhere that offered retirement benefits of any sort, but if I had I would probably be saying enough is enough, I want my assets under my control NOW! I’d rather potentially face a penalty in the future, than not have anything at all if things “should” get worse.

nate
nate
12 years ago

One other thing, in a hyperinflation scenario, silver would be extremely volatile. Who is to say you didn’t sell on a low day, or perhaps after things started to be put back together. Maybe things go back to normal and you buy replacement silver, looks to me like none was ever taken out. The trucker in me has the instantaneous thought of two books. .the list goes on. Your best tool is your brain, if it is expected to keep you alive, you should exercise it often. More than one way to skin a cat.

Aaron
Aaron
12 years ago

Great show Jack! This seems to stir up a little of controversy.

I really think that the controversy stems from fear of the government. Yes if you give the government power over your life, than government will take power over your life.

I totally see how the Self Directed IRA gives us power to make swift decisions with our wealth. In hyperinflation, the money you have in your IRA, by the time you get it out, will be as worthless as TP. Maybe even more useless, at least with TP its soft. In addition, if there are other catastrophic events you can trade your silver for something like beans, bullets, or Band-Aids. For those naysayers, try to sell someone post catastrophe that when the system gets back up and running, you will make a unqualified distribution from your IRA or 401(k) to pay them back.

bluprint
bluprint
12 years ago

In general banks will act as a trustee for almost anything, so that would be a good source. I audited an old bank once in Western Ark. They held all kinds of assets… I personally would focus on smaller/local type banks. Ask to talk to the trust department.

Also, in case anyone is curious an LLC is not a corporation.

Insidious
Insidious
12 years ago

Totally psyched about the AOCS fractional silver! Go Rob!

There are a lot of humorous ‘objections’ in the comments.. which I would summarize as:
‘What are the tax consequences after the apocalypse!’

Uh. Really? In an uber SHTF scenario, filling out your tax forms properly is going to be the least of your problems. So.. lets ignore that and instead go for the other objection:
‘If I make a lot of money (dollars), I’ll get taxed on it’

Again.. duh. Assuming there is a functioning tax authority, they always want to dip their hands into your pocket.. so as one of your 13 Skills goal for this year, put down ‘Get smart about taxes’ and start thinking about how to avoid them.

Why focus on the fear of something that hasn’t happened (and may never happen) rather than on what YOU are going to do to prepare for the future? As a closer.. a little math for the hyper inflationary challenged..

You have $100. Dollar is devalued 99%
Scenario 1:
You hold onto your $100 bill, its purchasing power is now $1. You go in with a friend and buy 1/3 of a candy bar (which is now selling for $300).
End Result: 1/3 candy bar

Scenario 2:
You buy 3 oz of silver. You trade 1 oz of silver for 100 candy bars. You sell them for $300 each. You pay the IRS a 75% capital gain tax of:
$33 – cost basis of silver
100 candy bars x $300 = $30,000.
$30,000 gross – $33 cost basis = $29,967. profit x 75% = $22,475.
End Result: You have 2 oz of silver and $7492. dollars.. or in candy bar terms.. 225 candy bars..

So, which is better? 1/3 of a candy bar or 225 candy bars?

Even assuming you traded all the silver, and paid all the taxes, you’d still have 75 candy bars vs. 1/3 of one. Even if the capital gains rate was 95% (!!!!) you’d still have 15 candy bars.

Insidious
Insidious
12 years ago
Reply to  Insidious

For those who would object to the 1 oz silver = 100 candy bars:

Assuming that today you can buy 36 candy bars for the equivalent dollars of 1 oz of silver

http://www.amazon.com/Hersheys-Variety-Assortment-Chocolate-Reeses/dp/B005CUK20Q/ref=sr_1_5?ie=UTF8&qid=1360089346&sr=8-5&keywords=candy+bar

And that silver doesn’t rise in relative value to the dollar (unlikely), but just ‘preserves’ the same value during inflation, and that food prices double with the rise in inflation (relative to the dollar), and that the IRS taxes you at an 75% capital gains rate (and you’re not clever enough to avoid it).. it still works out like this:

Candy Bar Cost:
$0.85 (today) x 99 (inflation) x 2 (doubling of price) = $168.

Candy Bars you can buy with your Federal Reserve Note:
0.6 ($100/$168)

Candy Bars you can buy with your silver:
36 bars x 3 oz / 2 (doubling of price) = 54

Candy Bars you can keep:
54 bars – 40.5 bars (75% to the IRS) = 13.5 bars

So you have 2250% more candy (13.5 bars vs. 0.6 bars) even after paying the ‘I wasn’t clever’ tax.

Paul Ely
Paul Ely
12 years ago

Silver lease thought: If the interest could be paid in different coins then it might become more valuable. Say you loaned the 1000 oz in Rob’s example. If the 20 oz’s were paid in 20 different coins and shipped to you or stored on-site then you might end up with a collectors coin worth more than the melt value of the coin. You would keep the 1000 oz working (for both parties) and take distribution of the interest each year. The value of the copper coins that were mentions spawned this idea.

Matthew N Gooseneck
Matthew N Gooseneck
12 years ago

Great show Jack i am sold on this.
Jack any thoughts on holding real estate in an IRA?

Sunshine7
Sunshine7
12 years ago

Okay, like I said before, I am not an expert by any means and to be honest, I’m only commenting because I would feel bad if I didn’t at least let you know what I found out about this. Apparently, during the webinar that this Bryan Ellis guy held, there was a so-called “Tax Attorney/Expert” on with him. This guy supposedly exposed a loophole within IRA agreements which suggests, that because the firm who furnishes the IRA refuses to be responsible or to indemify (if I’m even saying that right) the value of the IRA, that the IRA is technically already exercised. In other words, just opening an IRA or already having one open, because of legal jargon and because of the refusal of the brokerage firm to do something like indemnify or something like that, it automatically makes the IRA a;lready prone to taxation before any withdrawl takes place. The Department of Labor supposedly knows about this and the US Gov is supposedly allowing a temporary time of clemency, but it is temporary. After this time frame, a larger tax than would be affordable, is to be placed on your IRA. I don’t know specifics. I apologize for that. But please look into it, at least. Google it and find out what your rights are. It doesn’t matter if your IRA is in silver, cash or otherwise. It will be heavily taxed much more than you can imagine, according to this so-called expert. I think he was based out of Arizona. His advice was to take all assets out of IRA’s because they are essentially worthless, according to the wording on their contracts and go against tax law. Now, as crazy as that might sound, just do the homework and check into it. It’s better to be safe than sorry.

By the way, Jack I love your shows and this, as usual was also a great show.

Very informative.

Blessings!

bloody rich
bloody rich
12 years ago

Question- I am listening to this podcast a 2nd time because I am confused about one thing. If I understand correctly, your IRA is ‘investing’ in 100% of the share[s] of the LLC you setup as a business. That business is your IRA investment – NOT what the LLC does. Just like if your IRA holds shares of common stock, the IRA is invested in that stock- NOT invested what the company is investing in. In this case, the LLC is purchasing the metals. In this case, aren’t the rules of allowable ira investments only relating to you being able to purchase that LLC, not what this LLC is investing in? It seems to me the IRS rules of allowable coins are irrelevant in this setup because you are not investing in metals. The allowable coins are only relevant if you are buying coins for your IRA. What am I missing, or is having the LLC follow the rules just ‘belt & suspenders’ a way to avoid IRS headaches, if they try to claim that if your IRA invests in n LLC that you are the manager of & is owned 100% by your IRA, such as this situation, they require that LLC you invest in to also follow the rules? If I buy mining stocks in my IRA, the mining company doesn’t have to only hold ‘allowable IRA investments’, so if i invest my IRA in an LLC I created, couldn’t the LLC invest in anything as long as it is legal? Maybe I am missing something. Thanks for great show.

Packrat
Packrat
12 years ago

On the subject of private vaults, here is one in Dallas, TX:
http://www.inwoodvaults.com/
They seem a bit expensive, but have no bank affiliation.

Ken
Ken
12 years ago

Am I missing something? If we get hyper inflation and an ounce of silver sells for $1,000,000 your silver would hold its value and you cold use it to pay the taxes. If you keep the $30 in cash and we get hyper inflation then you may owe a smaller tax but your $30 would be pretty much worthless. I am not sure about the math, but wouldn’t the tax cost the same amount of silver if we get hyper inflation or even if we don’t.

Greg
Greg
12 years ago

There was one situation that you didn’t cover that I really thought you were going to cover. I have gold and silver eagles in that depository in Delaware already under Goldtrust. If I want to roll it over, can I get those eagles out from the depository from my self-directed IRA to another self-directed IRA or would I have to sell them, transfer cash, and then risk buying them again at a higher price? How would you transfer 100-150 lbs of silver anyway?

Greg
Greg
12 years ago
Reply to  Greg

Well, Jack, I listened to the show twice and he did not specifically cover that issue. He just said you sell what is in the traditional IRA, which is usually stocks and bonds not gold and silver, and transfer the cash and buy into the new Self Directed IRA.
Plus, I should have looked this up before I asked the question, but Goldstar, who holds my gold and silver in the depository said they can just ship the coins to your new IRA if you wish. They would use USPS Registered Mail, which is the most secure mail service. I’d also recommend insurance and restricted delivery (must see your ID) on top of that for greater security.
I’m quite excited at this possibility.

Ken
Ken
12 years ago

I wondered if this worked for accounts that were still active or only accounts from previous jobs?

Ernie
Ernie
12 years ago

Would it be possible to ask Mr Gray if he can recommend a good silver refiner? I have some sterling silver art bars that I would like to convert to .999 bars.

All of the local coin shops way undervalue sterling. The best I’ve found is 80% of the true silver weight (weight * .925). I’ve seen online refiners offer 95%+ of the true silver weight, but I don’t know which are reliable.

Thank you.

Kahuna
Kahuna
12 years ago

So, how does one form their own depository to store the precious metals? Also, is there any information on location, minimum size, and types of safes that would be allowed for my depository?

ET Wards
ET Wards
12 years ago

I do not believe that you are permitted to have your own depository (safe) at home to store precious metals. IRS rules indicate that they must be in possession of a trustee or banking institution (reference IRC Section 408(m). IRS guidance is clear that metals cannot be held in possession of the trustee. Most tax professionals have taken the position that holding metals in a safety deposit box of a US bank in the name of the Self Directed IRA LLC or solo 401k trust satisfies IRC Section 408(m) required of “physical possession”. Again, it’s important that you consult a tax attorney to ensure you are abiding by all IRS regulations. See this link for more info. http://www.irafinancialgroup.com/wp/can-i-hold-store-precious-metals-owned-by-a-self-directed-ira-in-a-safety-deposit-box/

Kahuna
Kahuna
12 years ago

Yeah, well, the impression that I got from listening to Rob Gray’s explanation was that I could form my own depository and hold my precious metals in it; this way I can be in control of my own metals in case of the SHTF.

Jack- can you plase clarify?

ET Wards
ET Wards
12 years ago

Let me clarify my statement. I’m not saying you can’t do this but that you should consult a tax attorney that specializes in this area that you trust before you proceed. The IRS guidance is clear on BULLION but has not to my knowledge issued any guidance on COINS.