Prohibited Transactions With IRA Metals
A prohibited transaction is any improper use of your IRA by you or a "disqualified person," such as selling your own coins to the IRA, using IRA metal personally, or pledging it as collateral. According to the IRS, if an IRA owner engages in a prohibited transaction, the account generally stops being an IRA as of January 1 of that year and is treated as fully distributed at fair market value.
Where the Rules Come From
The prohibited transaction rules are in Internal Revenue Code section 4975, and section 408(e) applies them to IRAs. The IRS summarizes them on its page on retirement topics: prohibited transactions and in Publication 590-A. The idea is simple: an IRA is for your retirement savings, not for current personal benefit, and the people closest to it cannot deal with it on the side.
Who Counts as a Disqualified Person
For an IRA, disqualified persons generally include:
- You, the account owner, and any fiduciary of the IRA.
- Your spouse.
- Your ancestors, such as parents and grandparents.
- Your lineal descendants, such as children and grandchildren, and their spouses.
- Businesses and entities that you or other disqualified persons control above certain thresholds.
Siblings, aunts, uncles and cousins are generally not on the list, but transactions with them can still raise issues if they benefit you indirectly. When unsure, ask a tax professional.
Prohibited Transactions Specific to Metals
Selling your own coins to the IRA
You cannot sell gold or silver you already own personally to your IRA, even at a fair price. Nor can a parent or child sell theirs to it. IRA metal must be bought from an unrelated dealer with IRA funds.
Buying IRA metal for yourself
The reverse is also prohibited: you cannot buy coins out of your IRA for your personal collection. If you want IRA metal personally, the route is a reported in-kind distribution.
Personal use or possession
Wearing, displaying or keeping IRA coins at home is personal use. Apart from prohibited transaction rules, the Tax Court treated home possession of IRA coins as a distribution in McNulty v. Commissioner (2021). See home storage risks and checkbook IRA LLC and gold.
Using metal as collateral
If you pledge any part of an IRA as security for a loan, the IRS treats the pledged portion as distributed. You cannot borrow against IRA gold.
Paying yourself or family
Paying yourself a fee for managing the account, or hiring a family member's company to provide storage or services to the IRA, can be prohibited.
Spending account funds on personal metal storage
Using IRA funds to pay for a personal home safe, insurance on personal property, or anything else that benefits you outside the account is improper.
What Happens If One Occurs
For an IRA owner or beneficiary, the consequence can be severe. The IRS states that the account generally ceases to be an IRA as of the first day of the year in which the prohibited transaction occurred. The entire account is then treated as distributed at its fair market value on that date, which means:
- The full value is generally included in your income for that year.
- If you are under the IRS-defined age, the additional 10% early distribution tax may apply. See the IRS page on the tax on early distributions.
- Penalties and interest may apply if the income was not reported.
Disqualified persons other than the owner who take part in a prohibited transaction can face excise taxes under section 4975. Separately, buying a collectible that does not meet the 408(m) exceptions is treated as a distribution of the amount spent, which is a different rule but has a similar effect. See our collectibles rule page.
How the Standard Setup Helps
A conventional metals IRA puts independent parties between you and the metal: a custodian holds the account, an unrelated dealer sells the metal, and a depository stores it. You choose products, but you never handle the metal or the cash directly. That structure does not make mistakes impossible, but it removes many opportunities for them. Our page on how a gold IRA works explains each role.
Goldco is a precious metals company, not a custodian. It says it works with all major self-directed IRA custodians and that IRA metals go to an independent insured depository. Its precious metals specialists are not licensed to give tax or legal advice. See Goldco storage and custodians.
Frequently Asked Questions
Can I buy gold from my brother for my metals account?
Siblings are not generally disqualified persons, but a related-party sale invites scrutiny. Most people avoid it and buy from an unrelated dealer.
Can I visit my metal at the depository?
Some depositories allow scheduled viewing. Viewing is not personal use, but taking possession is a distribution.
Is buying from a dealer that works with my custodian prohibited?
Buying from an unrelated dealer is normal. Custodians and dealers are generally separate businesses, and neither is a disqualified person merely by providing services.