Published August 2026
How the structure actually works
A self-directed IRA contributes its cash as the sole member of a newly formed LLC. The IRA owner is named manager of that LLC and gets “checkbook control” — the ability to direct purchases for the LLC without the custodian signing off on each individual transaction. It’s a legitimate, commonly used structure for assets like real estate, private notes, or other holdings a passive custodian doesn’t actively manage.
Where it breaks for precious metals specifically
IRC §408(m) requires that bullion or coins held by an IRA remain in the physical possession of a “trustee” — a bank, credit union, or IRS-approved non-bank trustee. An LLC managed by the IRA owner personally does not meet that definition, no matter how the paperwork is structured. In McNulty v. Commissioner (T.C. Memo. 2021-84), the taxpayers’ IRA-owned LLC purchased roughly $411,000 in gold and silver American Eagle coins and stored them in a home safe. The Tax Court ruled that taking personal possession constructively distributed the entire IRA — about $730,000, including a condo the LLC also held — generating roughly $270,000 in tax plus more than $50,000 in accuracy-related penalties.
| What a checkbook IRA LLC can legally do | What it cannot do for precious metals |
|---|---|
| Buy/sell real estate, private notes, or LLC interests without per-trade custodian approval | Store IRA-owned silver anywhere except an approved depository or qualifying trustee |
| Hold silver purchased through the LLC | Give the IRA owner personal physical possession of that silver |
| Reduce transaction friction on frequent alternative-asset trades | Sidestep IRC §408(m)’s physical-possession-by-a-trustee requirement |
Per IRC §408(m) and McNulty v. Commissioner, T.C. Memo. 2021-84 (U.S. Tax Court).
Frequently Asked Questions
Does forming an LLC change where IRA-owned silver has to be stored?
No — IRC §408(m)’s physical-possession-by-a-trustee rule applies the same way whether the IRA owns the metal directly or through an LLC.
What actually happened to the McNultys?
The Tax Court treated their home storage as a full distribution of the IRA’s entire value, triggering ordinary income tax plus penalties on hundreds of thousands of dollars — not just the value of the coins themselves.
Are checkbook IRA LLCs illegal?
No — they’re a legitimate structure for many self-directed investments. The legal problem is specific to using one to take personal possession of precious metals.
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