What the amount at risk means
The checker prices what a home storage arrangement costs if the IRS treats the whole account as distributed in the year the metal comes home. The share at risk moves with the balance and your age, and the legal position does not move at all.
- Any balance What the Tax Court held
- The Tax Court decided McNulty v. Commissioner on 18 November 2021, holding that an IRA owner who took physical possession of American Eagle coins through an IRA-owned LLC had received a taxable distribution, and it upheld accuracy-related penalties because reliance on the promoter's website did not establish reasonable cause. Section 408(m) requires IRA bullion to be held by a bank or an approved non-bank trustee, and an LLC in between does not change that.
- Under 25% at risk A smaller account, and the same rule
- The dollar figure is lower because the balance is, and the treatment is identical. A distribution is a distribution regardless of size, and the accuracy-related penalty runs at 20% of the underpayment on top of the ordinary income tax.
- Above 40% at risk The tax and penalty take most of the account
- A large balance distributed in a single year lands in the top brackets, and an owner under 59 and a half adds the 10% early distribution penalty to that. This is the arrangement's actual downside case, and it arrives in one tax year rather than gradually.
What is a home storage gold IRA?
There is no home storage IRA in the tax code. The phrase is marketing for a structure in which a self-directed IRA owns an LLC, you are named manager of that LLC, and the coins end up in a safe at your house. Section 408(m) requires IRA bullion to be held by a bank or an approved non-bank trustee, and the argument being sold is that the LLC satisfies that requirement.
That argument has been tested and it failed. In the McNulty decision of November 2021 the Tax Court held that an IRA owner taking physical possession of American Eagle coins through an IRA-owned LLC had received a taxable distribution, and it treated the amounts used to acquire those coins as distributed in the years of receipt. The court also upheld accuracy-related penalties, finding that reliance on the promoter's website did not establish reasonable cause.
The exposure is the whole account rather than the coins in the safe, which is why this checker prices the balance. Set against that, proper depository storage costs between $90 and $290 a year across the twelve custodians we priced, and that annual charge is the expense the arrangement is offering to save you.
How IRA metal is legally held, and why home storage fails
Section 408(m) requires bullion held in an IRA to be in the physical possession of a bank or an approved non-bank trustee. That is the whole rule, and it is why a legitimate gold IRA involves a custodian who administers the account and a depository that holds insured, audited metal, with the account owner directing both and touching neither.
The home storage arrangement proposes routing around that by having the IRA own a limited liability company, with the account owner as manager, so the metal can sit in a safe at home while nominally belonging to the LLC. The Tax Court addressed exactly that structure in McNulty v. Commissioner on 18 November 2021, holding that an owner who took physical possession of American Eagle coins through an IRA-owned LLC had received a taxable distribution of the full amount, and it upheld accuracy-related penalties because relying on the promoter's website did not establish reasonable cause.
What the arrangement is offering to save is worth putting next to what it risks. Depository storage runs $90 to $290 a year across the twelve custodians we priced, and the downside case is the entire account treated as distributed in one tax year, taxed as ordinary income, plus a 20% accuracy-related penalty and a further 10% if the owner is under 59 and a half. That is the trade, and this checker prices it against your own balance.
How to use the home storage risk checker
Four inputs, and the first one is deliberately the whole balance rather than the portion you were planning to keep at home.
-
Enter the balance that would be at risk
Use the whole IRA balance rather than the value of the coins you were thinking of keeping at home. In McNulty the court treated the entire amount used to buy the coins as distributed in the year of receipt, not the portion in the safe.
-
Set your age
Under 59½ a deemed distribution picks up a 10% additional tax on top of ordinary income tax. Over it, the penalty falls away and the income tax does not.
-
Set a marginal rate you can defend
A deemed distribution of a whole IRA is added to your income in one year, which usually pushes part of it into a higher bracket than your normal one. The default assumes that and you can override it.
-
Read the remainder, not the tax
The bar shows the balance split into income tax, penalty and what is left. The last segment is the number that matters, and on a large balance under 59½ it is well under two thirds of where you started.
What each input means, and where to find the number
The marginal rate is the one worth thinking about, because a whole-account distribution stacks on top of your other income in a single year.
- Account balance
-
The full value of the IRA. The exposure is the whole account rather than the coins in the safe, because the court treated the taxpayer's receipt of the coins as a distribution of the amount used to acquire them.
Where to find it The custodian's most recent statement.
- Your age
-
Decides whether the 10% additional tax on early distributions applies. The threshold is 59½ exactly, and it is measured at the time of the deemed distribution rather than at the time of filing.
Where to find it Your birth date.
- Marginal tax rate
-
The rate the deemed distribution would be taxed at. A whole-account distribution stacks on top of your other income in a single year, so the effective rate is usually higher than the bracket you normally sit in.
Where to find it Your last return shows your marginal bracket. Add the balance to that year's taxable income to see which bracket the top of it lands in.
- State tax rate
-
Optional, though state income tax applies to a deemed distribution in most states, and a handful add their own penalty on early distributions on top of the federal one.
Where to find it Your state's revenue department publishes the schedule. Nine states charge no income tax at all.
How the exposure is calculated
Deliberately blunt arithmetic, because the risk being priced is losing the account rather than a difference in a storage fee.
The checker treats the whole balance as an ordinary-income distribution in a single year, applies the marginal rate you set, adds the 10% additional tax under section 72(t) where you are under 59½, and adds state tax where you enter a rate. It is deliberately blunt, because the risk being priced is the loss of the account rather than a fee difference, and a more precise model of the bracket stack would imply a confidence the outcome does not have.
cost = (balance × federal rate) + (balance × state rate) + (balance × 10% if under 59½)
- balance
- The full IRA value, since the exposure is the account rather than the coins
- federal rate
- Your marginal rate, which a whole-account distribution usually raises
- 10%
- Section 72(t) additional tax on an early distribution
What this estimate leaves out
- Bracket stacking, since a whole-account distribution is taxed across several brackets rather than at one rate and the real bill usually comes in higher than a single-rate estimate.
- Accuracy-related penalties under section 6662, which reached up to 20% of the underpayment in McNulty and are not in this figure.
- Interest on the underpayment, which runs from the original due date and compounds.
- State early-distribution penalties, which a handful of states charge on top of the federal one.
- The loss of future tax deferral, which on a long horizon is often larger than the immediate bill.
Three balances, and what a deemed distribution costs
One under 59½, one over it, and the case the Tax Court actually decided.
Donald, 55, $200,000
Persuaded by an LLC arrangement that lets him keep the coins in a safe at home.
- Balance
- $200,000
- Age
- 55
- Marginal rate
- 24%
About $68,000 in federal tax and penalty, leaving roughly $132,000.
A third of the account, before state tax. He also loses the tax deferral on everything that was left, since the account no longer exists once it has been fully distributed.
Andrea, 63, $400,000
Past 59½ and told the penalty does not apply to her, which is correct as far as it goes.
- Balance
- $400,000
- Age
- 63
- Marginal rate
- 32%
About $128,000 in federal tax, leaving roughly $272,000.
No penalty and a very large tax bill, because $400,000 of ordinary income in one year pushes most of it into a bracket she never normally sees. The absence of the 10% is the smallest part of what is happening here.
The McNultys, the actual case
Bought American Eagle coins through a self-directed IRA-owned LLC and kept them in a safe at home, 2015 and 2016.
- Balance
- $411,000 across two years
- Structure
- IRA-owned LLC
- Outcome
- Deemed distributed
Tax Court found taxable distributions, plus accuracy-related penalties.
The court held that physical possession by the IRA owner is receipt of a distribution regardless of the LLC in between, and that relying on the promoter's website was not reasonable cause. That second finding is why the accuracy penalties stood.
The rules and the case behind them
The citation, the two penalties and the storage cost the whole arrangement is meant to avoid.
- Nov 2021 The decision that settled it
In McNulty, reported at 157 T.C. No 10, the Tax Court held that an IRA owner taking physical possession of coins through an IRA-owned LLC had received a taxable distribution, and it upheld accuracy-related penalties on top.
- 10% Additional tax under 59½
Applied to the whole deemed distribution on top of ordinary income tax. Section 72(t) sets it, and the exceptions to it are narrow and mostly do not apply here.
- 20% Accuracy-related penalty
Section 6662 charges up to 20% of the underpayment for a substantial understatement. In McNulty the court found the taxpayers had not established reasonable cause, so it stood.
- $90 to $290 What depository storage actually costs
The annual charge across the twelve custodians we priced, segregated or commingled. That is the cost the home-storage pitch is offering to save you.
What people get wrong about storing IRA gold at home
All four of these were arguments made in McNulty, and the court rejected each one.
Is a home storage gold IRA a recognised structure?
No, there is no such thing in the tax code. The phrase is a marketing term for an IRA-owned LLC with the owner as manager, and McNulty is the case where the Tax Court looked at that structure and found that possession of the coins was a distribution regardless of the entity holding title.
Does an LLC owning the metal mean I do not possess it?
No, and that was the argument the McNultys made before the court rejected it. Section 408(m) requires a bank or an approved non-bank trustee to hold the bullion, and the court read physical possession by the IRA owner as receipt whatever the ownership chain looked like on paper.
Would only the coins held at home be taxed?
No, the exposure is the whole balance. The court treated the amount used to acquire the coins as distributed. The practical exposure is the whole balance rather than the portion in the safe, which is why this checker prices the account and not the coins.
Is relying on the promoter a defence?
No, the Tax Court has already rejected it, because when the McNultys made that argument the court found that relying on a promoter's website did not establish reasonable cause, since the promoter was selling the product, and the accuracy-related penalties were upheld on that basis.
Home storage gold IRA questions
Is a home storage gold IRA legal?
No, and there is no home storage IRA in the tax code at all. Section 408(m) requires IRA bullion to be held by a bank or an approved non-bank trustee, and in the McNulty decision of November 2021 the Tax Court held that an owner taking physical possession through an IRA-owned LLC had received a taxable distribution. The structure is sold, and it has been tested in court and it failed.
What was the McNulty case?
Andrew and Donna McNulty bought American Eagle coins through a self-directed IRA that owned an LLC, and kept the coins in a safe at their home. The Tax Court found taxable distributions of $321,000 and $90,000 for 2015 and 2016, rejected the argument that the LLC's ownership prevented receipt, and upheld accuracy-related penalties because reliance on the promoter's website was not reasonable cause.
Can I store my gold IRA metal in a bank safe deposit box?
No, not in a box rented in your own name. The metal has to be held by a trustee or custodian meeting the requirements of section 408, and a box you can open yourself is possession. Some custodians use bank vaulting arrangements, and the distinction is whether the custodian controls access rather than whether a bank building is involved.
What does it actually cost to store metal properly?
Between $90 and $290 a year across the twelve custodians we priced, with commingled storage at the lower end and segregated at the upper. That is the expense a home-storage arrangement is offering to save, set against a deemed distribution of the whole account if it is unwound.
What if I already have a home storage arrangement?
This is a question for a tax attorney rather than a calculator, and it is worth asking soon, because the exposure grows with interest for as long as the position stands. What this tool does is size the number so the conversation starts from a realistic figure rather than from the promoter's description of the risk.
Does the 10% penalty apply if I am over 59½?
No. Section 72(t) only applies below that age, so an over-59½ deemed distribution carries income tax and no additional tax. That is a smaller relief than it sounds, because the income tax on a whole account in one year is the large number and the penalty is the small one.