Bryan Camp, has published an article on the TaxProfBlog, titled “Lesson From The Tax Court : How To Mess Up Your Checkbook IRA”, which discusses the facts and opinions of checkbook IRAs. The article begins as follows:
The idea that freedom means control over your own destiny s arguably the most defining characteristic of American culture. It is most certainly the basis on which various companies promote “checkbook IRAs.” If you Google that term you will find a gaggle of companies urging people to take full control of their retirement funds, to free themselves from restrictive IRA custodians. The companies promote structures that purport to allow taxpayers maximum freedom over their investment decisions. Freedom equals control.
In Andrew McNulty and Donna McNulty v. Commissioner, 157 T.C. No. 10 (Nov. 18, 2021)(Judge Goeke) we learn that too much control messes up a checkbook IRA. There, Mr. and Ms. McNulty created a checkbook IRA, funded it with transfers from their other retirement accounts, and then used the money to buy gold coins which they stored in their home. The Tax Court said that last bit—storing the physical coins in their home—was too much control and thus the receipt of the coins was a taxable distribution to them. While the taxpayers crossed the line in this case, it may not be altogether clear where that line is. How far can a taxpayer go before they mess up their checkbook IRA? Let’s see what we can learn. Details below the fold.
Click here to see the full article: “Lesson From The Tax Court : How To Mess Up Your Checkbook IRA”
Posted by Isabella King, Associate Editor, Wealth Strategies Journal.