Checkbook Control IRA LLC Recent U. S Tax Court Case – McNulty v. Commissioner, 157 T.C. No. 10 (Nov. 18, 2021)

Filed November 18, 2021 (ANDREW MCNULTY AND DONNA MCNULTY, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent), a taxpayer’s self-directed IRA was deemed as involved in a taxable distribution because the tax payer (McNulty) stored at her home the American Eagle gold coins purchased through her IRA owned LLC ( IRA LLC, also known as a checkbook IRA).

Essentially, an IRA LLC facilitator, who is named in the court case along with the self-directed IRA custodian, mistakenly advertised to IRA LLC investors that they could store the precious metals including American Eagle coins at their home without tax consequences or penalties since they were owned by the IRA LLC (checkbook IRA).

It is important to note that while the IRA whether through the IRA or the IRA LLC and the solo 401k rules allow for investing in precious metals including American Eagle gold coins (visit here for a list of allowed metals in both an IRA and a solo 401k), they must be stored with a depository taking institution such as a bank. For guidance on storing requirements See IRS Private Letter Ruling 200217059

The Securities and Exchange Commission (SEC) Reports Enforcement Results for 2021 and Cryptocurrency and SPACs Among the Named Actions

On November 18, 2021 the The Securities and Exchange Commission (SEC) announced a large increase in enforcement actions compared to 2020. Cryptocurrency and SPAC were seen as emerging threats. For instance, the Commission notes that it charged a company for operating an unregistered online digital asset exchange, charged a crypto lending platform and top executives alleging $2 billion in fraud, and brought an action against a special purpose acquisition company and others for alleged misconduct in a SPAC transaction.

Rooting Out Misconduct in Crypto

  • Charged entities and individuals with unregistered and/or fraudulent offerings of digital asset securities, including: fraud and unregistered offering charges against three individuals who founded and promoted digital asset companies; charges against an issuer and its founders for allegedly defrauding more than a thousand investors in an unregistered offering of digital asset securities; and charges against Ripple Labs and two of its executives alleging a $1.3 billion unregistered offering.
  • Took action against other misconduct in the crypto market, including charging the operator of ICO listing website Coinschedule.com with unlawfully touting digital asset securities.

Following is a list of other enforcement actions:

Who is Required to Take Required Minimum Distributions (RMD) from their Solo 401k Plan in 2021?

The requirement to make Required Minimum Distributions from your solo 401k is back for 2021.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act allowed plan sponsors to suspend required minimum distributions payable in 2020. There is no similar relief for 2021.

Required minimum distributions for 2021 must be paid no later than December 31, 2021, or by April 1, 2022, for initial required minimum distributions. Also, the Setting Every Community Up for Retirement Enhancement (SECURE) Act changed the required beginning date to age 72 for participants who had not attained age 70-1/2 by December 31, 2019.

Mega Backdoor Roth Solo 401k Ban Passes House Hurdle But Senate Sign Off Still Needed

As reported previously, the Mega Backdoor Roth Solo 401k and IRA bans that had been added back to the Build Back Better Act of 2021 were included in the version of the legislation that passed the House today.

While this is an important milestone for the legislation, there is still a ways to go legislatively.

The House vote sends the package to the Senate where it is expected to take up the legislation in December, and more importantly, not accept the House version “as is” – changes made in the Senate would then send the legislation back to the House for a final vote before sending it on to the President’s desk for signature.

In addition to possibly being removed from the Senate version of the legislation, it is possible that the legislation will be delayed until January given the concerns that enacting the spending package could exacerbate inflation concerns.

If the ban does go through this year, it may result in the ban of the mega backdoor Roth solo 401k by 12/31/2021 (this year); however, the ability to make annual Roth solo 401k contributions will not be impacted, which are currently at $19,500 per year plus $6,500 catch up for those age 50 or older. 

Stay tuned as we continue to monitor the legislation and keep you posted!

Infrastructure Bill Signed into Law Today November 16, 2021

The anticipated $1.2 million Infrastructures Investment and Jobs Act was signed into law today by President Biden.

While the newly passed legislation does not address the pending plan to ban the the backdoor Roth and the mega backdoor Roth including the mega backdoor Roth solo 401k which are part of the pending Bill Build Back Better Act of 2021, it does address the following:

Amends the Internal Revenue Code definition of “broker” to include “any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets (cryptocurrency) on behalf of another person.”  These updates will become effective after December 31, 2023.

For plan years after December 31, 2021, the bill extends by 5 years the minimum and maximum “corridor” for determining interest rates for single employer pension funding, relief initially granted by the American Rescue Plan (ARPA).

For disaster tax relief, tax payers impacted by a federally declared disasters under Code Section 7508A will receive an automatic extension (at least a minimum 60-day time frame) of certain deadlines. The new legislation updates the definition of disaster relief to mean “an area in which a major disaster for which the President provides financial assistance under section 408 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5174) occurs.” 

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