The Internal Revenue Service does not dictate which investments or securities you can put into your individual retirement account, but it does prohibit you from putting a couple of specific items in your IRA. You can't put a life insurance policy in your IRA, and you can't hold collectibles in your IRA. But as with just about every other rule, there are some exceptions.
The IRS considers such items as works of art, antiques, rugs, gemstones, metals, coins, stamps and alcoholic beverages to be collectible items, which you cannot put into your IRA. The IRS adds the ambiguous phrase "certain other tangible personal property" to its list of prohibited collectibles. This covers anything else the IRS might determine to be a collectible item, even if it is not specifically identified as such in official IRS publications.
Putting a collectible item in your IRA is a prohibited transaction. If you put such an item into your IRA, the IRS will consider the value of that item to be distributed to you in the tax year that you made the investment. If you took a tax deduction for the contributions used to buy that item, you'll have to pay ordinary income taxes on the distributed amount. You might also be subject to an additional 10 percent early distribution penalty.
The IRS makes an exception to its collectibles rule as it relates to metals and coins. You can put certain gold and silver coins minted by the U.S. Treasury in your IRA. Qualifying coins include one-ounce silver coins, and gold coins that are one, one-half, one-quarter or one-tenth ounce. You can also put certain other gold, silver, platinum and palladium coins and bullion into your IRA if the metals meet specified purity standards.
Investment in Investments
While you can't put collectibles into your IRA, you might still gain exposure to certain types of collectibles by investing in companies or organizations that have such holdings. For example, you can't put gold bullion that does not meet purity standards into your IRA, but you can put the shares of the stock of a gold mining company into that account. You can't put antiques into your IRA, but you can put shares of a limited partnership that invests in antiques into your account.
Mike Parker is a full-time writer, publisher and independent businessman. His background includes a career as an investments broker with such NYSE member firms as Edward Jones & Company, AG Edwards & Sons and Dean Witter. He helped launch DiscoverCard as one of the company's first merchant sales reps.