Martha has been impressed with the appreciation of the coin collection she received as a gift from her mother and would like to take advantage of this by using coins as an investment in the IRAs. Which of these statements regarding coins as investments in IRAs is CORRECT? A) Any government-issued gold coins, such as Krugerrands and American Eagles, are appropriate for IRA investment. B) No more than 25% of Martha’s IRA assets may be invested in coins. c) Martha should approach her coin dealer and ask that a collection similar to the collection her mother gave her be created as an D) American Eagle gold coins are permitted IRA assets.
The Correct Answer and Explanation is:
The correct answer is D) American Eagle gold coins are permitted IRA assets.
Explanation:
Individual Retirement Accounts (IRAs) can hold a variety of assets, but there are specific rules governing what can be included, especially with precious metals such as gold and other coins. To clarify the provided options:
A) Any government-issued gold coins, such as Krugerrands and American Eagles, are appropriate for IRA investment.
- This is incorrect because not all government-issued coins are allowed in IRAs. The IRS has strict regulations on which coins can be held in a precious metals IRA. For example, South African Krugerrands are not permitted, as they do not meet the IRS’s standards for purity. Only coins such as American Eagle gold coins, Canadian Maple Leafs, and certain other coins made by governments and meeting specific purity requirements can be included.
B) No more than 25% of Martha’s IRA assets may be invested in coins.
- This is incorrect because there is no limit on the percentage of an IRA that can be invested in precious metals like coins, provided those assets meet the IRS guidelines. The key consideration is whether the precious metals are IRS-approved (e.g., American Eagle coins, gold, silver, platinum, or palladium bars of a certain purity).
C) Martha should approach her coin dealer and ask that a collection similar to the collection her mother gave her be created.
- This is incorrect because IRA investments in coins must meet specific purity requirements set by the IRS. A coin dealer may not create a collection that can be invested in an IRA unless those coins meet these standards. A collection similar to Martha’s mother’s collection may not necessarily meet the IRS’s criteria.
D) American Eagle gold coins are permitted IRA assets.
- This is correct. The IRS allows American Eagle gold coins (as well as other government-issued coins like the Canadian Maple Leaf) to be included in IRAs. These coins must meet purity standards, and only certain coins and bars made of gold, silver, platinum, or palladium are eligible.
In summary, Martha can invest in IRA-approved gold coins like the American Eagle series, but she must ensure the coins meet IRS guidelines and that they are purchased through an IRS-approved custodian to hold in an IRA.
