IRA investments

[Guest Bill U.]

Does anyone know if there are any IRS rules or publications of what can and cannot be held in an IRA? I.e. real estate, certain collectible coins, private placements etc..... :confused:

[John G]

In IRS publication 590 on page 32 and 33 some of the restrictions and limitations are covered. For example, art, antiques, gems, and most "collectables" can trigger penalties. If you make such an investment, the IRS treats it as a distribution to you with all of the tax and 10% penalties that may apply. The only exception mentioned is investments in gold or silver coins minted by the the US Treasury. Other restrictions include borrowing money from an IRA, selling property to an IRA, using an IRA as collateral for a loan, etc. Perhaps some of the accountants can post other citations on eligible investments.

Besides the IRS, you also have custodian rules on allowed investments which are often more restrictive. For example, some will not allow direct IPO participation, pink sheet stocks, low value stocks, or covered calls. Reasons for conservative custodian rules include: risk aversion, a desire to minimize special handling, and the year end valuation rule. Because naked calls expose an account to unlimited liability, they are never allowed. {you can't just add money to an IRA to cover for a bad investment}

What is allowed? Well the core options include: stocks, bonds, cds, money markets, and mutual funds. If you are considering more "exotic" options, you should consult a tax professional or accountant and find a custodian that will support your investment (typically they charge higher fees).