In-kind distribution of precious metals – Valuation
I have been advised that, for purposes of valuing an in-kind distribution of precious metals from my self-directed IRA, I can use the “melt value” of the metals as the FMV for income tax purposes. Is this information accurate? Do you know of any authority supporting this proposition?
Permalink Submitted by Alan - IRA critic on Mon, 2014-04-07 02:16
Your custodian should be able to provide guidance on how to value any holdings they allow in their IRA accounts. The IRS does not generally publish advice on how to determine the FMV of various assets. The general definition of FMV is what a willing buyer would pay to a willing seller of the asset.
Permalink Submitted by Joe Luby on Mon, 2014-04-07 15:32
The information you received regarding “melt value” of the metals being the same as FMV for income tax purposes is incorrect. FMV is the price at which a particular asset would change hands between a willing buyer and a willing seller, both of whom are aware of all relevant facts and neither being compelled to act. For example, assume that your IRA holds anitque coins with significant numismatic value to collectors. If sold at auction or through a dealer they would each fetch $5,000. However, they only contain one ounce of gold which has a current spot price of $1,300 (roughly equivalent to the “melt value” referenced in the earlier post). In this case, the FMV for income tax purposes is $5,000 which is what willing buyers and willing sellers would agree to in the marketplace. The notion that one can buy precious metal coins at a premium and then report their intrinsic (melt) value without regard to any other valuation factors is a widely distributed error. I have heard of many metals brokers using such false information to encourage unsuspecting buyers to purchase premium (i.e. higher commission) products instead of lower premium bullion products.
Permalink Submitted by Jose Morales on Mon, 2014-04-07 18:49
It should also be pointed out that estabishing a FMV is the sole responsibility of the Custodian, which you cannot be even with a “self directed IRA.” The account holder should never be allowed to determine what the FMV is and dictate that to the Custodian.