Checkbook LLC Gold IRAs After McNulty: What the Tax Court Killed and What Survives

The Checkbook Control IRA Pitch and How It Was Sold

A checkbook control IRA places retirement funds into an LLC that the account holder manages directly. Because the manager controls a dedicated checking account, they can complete investments without routing every transaction through a custodian. For certain investments, such as real estate purchases, private-party loans, or tax lien certificates, this arrangement has recognized applications in self-directed IRA practice.

Promoters extended that concept to physical gold and silver by layering on a second argument drawn from IRC 408(m). The pitch ran approximately as follows: American Eagle coins are explicitly excluded from the IRA collectibles prohibition under IRC 408(m)(3). If your IRA owns the LLC, and the LLC purchases the coins, the LLC, not you personally, holds the metals. You can therefore store them at home or in a safe of your choosing without triggering a distribution.

Each sentence in that pitch contains something accurate. American Eagle coins are excluded from the collectibles prohibition. The LLC is a legally separate entity. But the pitch omitted the half of the statute that defeated the entire argument, and the Tax Court’s 2021 opinion closed the gap the promoters were exploiting. Understanding what the statute actually says is the starting point for understanding why the arrangement never worked.

What the Tax Court Decided in McNulty v. Commissioner

The Facts Before the Court

The taxpayers in McNulty held a self-directed IRA that invested in a single-member LLC they managed. Through the LLC, they purchased American Eagle gold and silver coins. The coins were shipped to and stored at their home address. The IRS determined that the coins represented a taxable distribution in the year of acquisition. The taxpayers contested that position, arguing that the LLC, as a separate legal entity, was the party holding the coins, not them personally.

The Court’s Holding

The Tax Court rejected the argument. The court found that delivery of the coins to the taxpayers’ home address, regardless of the LLC interposed between the IRA and the account holders, placed the metals in the taxpayers’ personal possession. The court applied the settled tax principle that substance governs over form. A single-member LLC fully controlled by the IRA owner does not create the arm’s-length separation needed to treat possession as belonging to a trustee rather than to the account holder.

The court grounded its analysis in the second clause of IRC 408(m)(3), the clause the promoters consistently omitted. The exception from the collectibles prohibition applies “only if such coin is in the physical possession of a trustee described under subsection (a) of this section.” That qualifying clause is not a footnote. It is a condition that must be satisfied for the exception to apply at all.

Because the trustee-possession requirement was not met, the coins were treated as distributed from the IRA in the tax year they were acquired. Their fair market value at the time of acquisition was included in the taxpayers’ gross income. The full text of the opinion is publicly available through the United States Tax Court at ustaxcourt.gov.

The Statute at the Center: IRC 408(m)

How the Collectibles Prohibition Works

IRC 408(m)(1) establishes the general rule: if an IRA acquires a collectible, the cost of that acquisition is treated as a distribution from the IRA in the tax year of purchase. The statutory list of collectibles includes artwork, antiques, gems, stamps, most coins, and metals in their tangible physical form.

Congress created two investment-grade exceptions that allow eligible precious metals to be held in an IRA without triggering the distribution rule:

• IRC 408(m)(2) exempts gold, silver, platinum, and palladium bullion meeting minimum fineness standards set by a regulated futures contract, provided the bullion “is in the physical possession of a trustee.”
• IRC 408(m)(3) exempts specifically enumerated coins, including American Eagle gold and silver coins, state-issued coins, and platinum coins described under 31 U.S.C. 5112(k), provided each coin “is in the physical possession of a trustee described under subsection (a) of this section.”

Both exceptions carry the same condition. Promoters of home storage arrangements consistently presented the first half of each exception (the coins or bullion qualify) while omitting the second half (they must be in a trustee’s physical possession). McNulty confirmed what the plain text of the statute already required.

Who Qualifies as a Trustee Under IRC 408(a)

A trustee under IRC 408(a) is a bank, an insured credit union, or a non-bank entity that has received specific approval from the Secretary of the Treasury to act as an IRA trustee or custodian. The IRS maintains authority over that approval process. Most established self-directed IRA custodians qualify in one of these categories. A single-member LLC organized and managed by the IRA owner does not.

The LLC has no IRS trustee approval. It holds no independent assets beyond what the IRA directs into it. Its manager, the account holder, has direct and immediate access to everything the LLC owns. Treating that arrangement as equivalent to holding assets through a bank or approved trust company would hollow out the statutory requirement entirely. The Tax Court declined to allow it.

Our guide on who regulates gold IRA custodians explains in detail the regulatory framework that governs which entities can serve as IRA trustees, how they are approved, and how they are supervised.

What Technically Survives After McNulty

The ruling drew a clear line rather than eliminating an entire structure. The following table summarizes what changed and what did not:

The operative distinction is not LLC versus no LLC. It is who controls physical access to the metals. If the IRA owner can reach the metals without going through an independent, custodian-supervised process, the trustee-possession requirement under IRC 408(m) is not satisfied.

Investors interested in how broader prohibited transaction rules interact with this analysis should review our guide on prohibited transactions under IRC 4975 in a gold IRA, which covers the full set of restrictions that can disqualify an IRA when the rules are violated.

The IRS Enforcement Posture Since the 2021 Ruling

The IRS had taken the position against home storage gold IRA arrangements well before the Tax Court weighed in. Its earlier arguments rested on administrative guidance, private letter rulings, and the plain reading of the statute. The McNulty decision added judicial precedent at the Tax Court level, eliminating the last credible legal argument promoters used to suggest the arrangement might survive an audit.

Prior to the ruling, some promoters pointed to the absence of a directly on-point Tax Court opinion as a reason for potential investors to view the arrangement as a gray area. That argument is no longer available. A Tax Court regular opinion, as opposed to a memorandum opinion, carries precedential weight in subsequent Tax Court proceedings. The McNulty opinion qualifies.

Investors who received home storage gold IRA marketing materials and acted on them before 2021 may still face open tax years subject to examination, depending on when they established the arrangement and the applicable statute of limitations. Penalties beyond ordinary income inclusion can arise when underpayments result from arrangements treated as lacking economic substance or constituting abusive tax shelters. A tax attorney or enrolled agent specializing in self-directed IRAs should be consulted about any remediation options specific to a given situation.

How Compliant Gold IRA Custodians Handle Physical Metals

Every IRS-compliant gold IRA custody arrangement routes physical metals to an independent depository that operates under custodian oversight. The structure that satisfies IRC 408(m) works as follows:

1. The investor opens a self-directed IRA with a custodian that qualifies as a trustee under IRC 408(a).
2. The custodian directs the purchase of qualifying coins or bullion from an approved precious metals dealer.
3. The dealer ships the metals directly to an insured, audited depository. The metals never pass through the investor’s possession in transit.
4. The depository holds the metals in an account registered in the name of the custodian for the benefit of the IRA. The investor has no independent access to the physical metals.
5. Annual fair market value statements are filed with the IRS on Form 5498, which the custodian submits as the responsible party.
6. Physical delivery of the metals to the investor requires initiating a formal IRA distribution, which is a taxable event reported on Form 1099-R.

The depository layer is not optional or merely conventional. It is what makes the arrangement legal. The investor’s inability to independently access the metals is a feature, not a friction point. It is precisely the independence that IRC 408(m) requires.

More on how the case fits into the warning history for home-storage pitches is available in our companion guide on home storage gold IRA and the McNulty warning.

Warning Signs in Checkbook Gold IRA Promoter Materials

Several recurring patterns appeared in marketing materials for home storage and checkbook gold IRA products before and after the McNulty ruling. Each represents an argument the court rejected or a misreading of the statute:

• Presenting the coin exemption without the trustee-possession requirement. Stating that American Eagle coins are not collectibles under IRC 408(m)(3) is accurate as far as it goes. Stopping there, without mentioning that the exemption applies only when the coins are in a trustee’s physical possession, omits the clause that controls the entire analysis.
• Treating the LLC as a fully independent party for tax purposes. The LLC is a separate entity under state law. Under federal tax analysis, the substance of who controls access to the assets governs. A single-member LLC managed by the IRA owner is, in substance, a direct extension of the owner’s control.
• Describing the arrangement as an undiscovered loophole. The statutory language that defeats the home storage approach was present in IRC 408(m) before the home storage pitch became commercially widespread. There was no loophole. There was a misreading of the statute that the Tax Court corrected.
• Citing the prior absence of Tax Court authority as implied permission. This argument had some residual force before November 2021. It has none after McNulty.
• Bundling LLC formation services and operating agreement templates with the gold purchase. The revenue from these kits flowed to the promoters. The legal exposure from acting on the arrangement belongs to the investor.

Consulting a tax professional before establishing any self-directed IRA arrangement involving physical assets is the reliable way to avoid exposure from misrepresentations in promotional materials.