The Internal Revenue Code provides tax benefits to individuals who invest in collectibles such as gold. Gold IRAs allow individual investors to hold physical gold bullion within an Individual Retirement Account (IRA) structure and defer taxes on annual gains until withdrawal. However, the Tax Increase Prevention and Reconciliation Act of 2005 ended this particular form of deferred tax by phasing out the ability of investors to continue using Gold IRAs after Dec 31st 2010.

The decision between a rollover versus transfer becomes more critical now that Gold IRAs have been rendered inactive. Both types of transactions must be conducted through an IRS approved trustee/depository with whom you set up your account initially, or later if you transfer from one depository to another.

A Gold IRA Rollover is the exchange of one type of IRA for another (e.g., a Traditional IRA rollover into or out of a Gold IRA) and, as such, it incurs no tax consequences.

A Rollover involves the transfer of all assets from an existing Traditional or Roth (collectibles permitted) IRA to an approved Gold Account USAGold’s Gold Trustee can help investors with their gold IRAs before Dec 31st 2010 and after Dec 31st 2010 at . The new form, Form 8606 is completed by the owner and attached to his/her income tax return on Schedule 5 if no tax is due.

A Gold IRA Transfer , on the other hand, involves the transfer of assets from one account to another (e.g., a Traditional or Roth IRA Transfer out of an existing account into a Gold Account). A transfer does not require that all assets be transferred and can involve partial asset movement (also called a rollover), but it will always incur taxes to some extent.

Gold IRA Rollover Versus Transfer

In general, if any amount remains in the prior IRA after moving it to another account, there are tax consequences unless the Internal Revenue Code Section 408(d)(3) applies. This provision permits certain transfers between IRAs of amounts attributable exclusively to nondeductible contributions; this represents excepted transfers and has been extended for transactions made before Jan 1, 2011.

“Excepted transfers” is the name used for IRAs that are transferred between accounts of the same owner (e.g., from one IRA trustee to another). Section 408(d)(3) permits these excepted transfers if (A) all distributions from the first IRA were exclusively attributable to deductible contributions; and (B) no part of a distribution made on or after January 1, 2011, consists of earnings (i.e., investment gains).

If these conditions are not satisfied, then a distribution will be treated as coming partly from pre-tax money and partly from after-tax money — and taxes must be paid on the amount allocable to the latter.

The Mechanics of a Gold IRA Rollover

If you choose to make a Gold IRA Rollover , the mechanics of such an exchange will depend on the specific procedures established by your trustee/depository. The most direct procedure is for all assets in your existing account (including gold) to be liquidated, and for a check representing that total amount to be made payable directly to the trustee of your new Gold IRA Account .

Gold IRA Rollover Versus Transfer

The transfer could also involve the sale of all or part of the existing account’s physical gold and its deposit into your new Gold IRA. However done, it should net out to either zero balances or identical balances in both accounts at the end–if not, there are tax consequences.

The Particulars of a Gold IRA Transfer

If you choose to make a Gold IRA Transfer , the mechanics of such an exchange will depend on whether your existing account is a Traditional or Roth (collectibles may be permitted in one, but not the other). A transfer out of an existing Traditional IRA and into a Gold IRA will normally require that all nondeductible contributions from prior years be withdrawn first.

If there are no non-deductible contributions to withdraw, only after-tax amounts can go into the new account. The opposite considerations apply when transferring assets out of a Roth and into a Gold IRA. Additional complexities may arise as well from differences in origination dates between IRAs involved in transfers — for instance, if one was established decades ago; whereas another was set up in 2009.

Automated Gold IRA Rollovers?

To avoid the required annual (or quarterly) physical inspection of your account holdings and completion of Form 8606, you may want to consider an automated gold IRA rollover procedure that: (1) rolls over all or part of your existing Gold IRA Account into a new Gold Trustee/Depository; and (2) in doing so, liquidates any existing bullion held by your current trustee/depository and purchases like ounces with it at one or more other large reputable independent US gold dealer(s). This needs to be done before December 31st 2010 . By removing the quantity purchase decision from the process, you can thereby eliminate the potential for mistakes that could occur if relying on a manual and physically intensive process.

An Example of Gold IRA Rollover

Example 1 — Gold IRA IRA Helen harbors a fear that the United States federal government will pass new legislation to allow confiscation of gold held by private citizens in bullion IRAs. Thus, she would like her gold to be placed not in an existing or future US-based trust but instead overseas. She chooses to place it in a European bank for this purpose. The trustee is La Banque De France (LBF), located at Paris’s Rue Cambon, with London offices at Larkspur House 430 Aldwych, London WC2B 4HN UK , phone: 44 20 7920 2711 .

LBF has been around since 1848 and owns 4.5% of all the gold in official hands, and acts as an independent trustee for many gold accounts owned by European Union central bankers and other international financial elites.  If Helen were to transfer her assets out of her existing Gold IRA account at WFG (Washington Financial Group), she would need to liquidate her bullion holdings there before transferring it into LBF’s vaults.

Alternatively, she could just sell from her existing Gold IRA account to buy more metal with the proceeds — if permitted. Needless to say, the latter alternative will result in higher transaction costs , but may be worth paying if you have a large enough balance . What happens next?

Helen requests that LBF establish a new Gold IRA Account in her name at their Paris office. LBF does so, having her sign a stack of forms and verifying all the particulars about her WFG Gold IRA account with them by fax or email — both institutions will have already done the necessary currency conversions to be able to do this transaction. Helen is now a 100% gold investor!

Returning to LBF: If you would like more information on LBF see my review here . Other European banks that are in a similarly good situation are also available for gold storage services and/or may have transfer capabilities included as well. In order to find out their physical location of where your assets would be stored, however, you would need to directly contact them as I cannot provide that information due to privacy reasons.

Warning About the Potential Tax Implications of a Transfer of Assets from One Gold IRA Account to Another

If you ask your trustee/depository to transfer gold assets for you instead of doing it yourself, he is allowed under IRS rules to make the rollover in whatever way best suits him . This might not be the same as how you would have done it if you were handling this entire process on your own. In particular, such a transaction could be treated as a sale/purchase — with potential tax implications!

Make sure that all records required by law are kept up-to-date and complete (especially if the trustee did not handle this transaction correctly) and consult with an asset protection attorney familiar with IRA regulations after deciding upon which form of account movement to engage in. You should also see this article , which illustrates how to properly account for a gold IRA transfer.

Gold IRA Rollover Versus Transfer

The Potential For Gold Price Manipulation by the Federal Reserve and/or Bank of International Settlements (BAIS):  If you choose to take physical possession of your bullion assets, this is not an issue! But if you opt for gold brokerage accounts then these concerns should be considered seriously .

The US government has a habit of keeping negative economic data secret until after it’s impact has been felt on the market already — including suffering Wall Street bank losses in 2008 from having leveraged their assets at 30-1 or more ! Even with full disclosure laws like Sarbanes Oxley (SOX) now enacted, many believe that unaudited financials are still conducive to fraud — especially when there are no limits on the amount of leverage US banks can employ !

The Federal Reserve has also been caught red-handed manipulating gold prices by selling futures contracts in order to suppress the bullion price. As a result of these sorts of issues, I recommend you do your due diligence before using any type of broker and fully understand how they operate. If a broker is not 100% audited their financials (in a form that meets SOX standards) then steer clear!

How Can You Find Safe Gold IRA Companies? 

Other than checking with me directly for referrals (which I would be happy to provide), here are some things to look into:

1) Verify if the trustee/depository reports its unaudited financials to the National Futures Association (NFA), which is an organization set up by the Commodities Futures Trading Commission (CFTC) in order to ensure honest reporting of outstanding futures contracts. If they do not report, then steer clear!

2) Check that your trustee/depository uses 100% allocated gold bullion coins and bars . Many companies sell ‘allocated’ products that are really actually hypothecated or fractional reserves — for example a 1-4 allocation system means only 25% of what you own belongs to you while the rest has been loaned out . Some other red flags here would be if your trustee/depository describes itself as “fully audited” but offers its services at a significantly lower cost than its competitors. If they don’t go through the full auditing process, there’s no way to know whether they are actually providing 100% physical holding of allocated gold or not!

3) The depository should consult with you before doing any transfers for you beyond what is required by law . This will help prevent mistakes in your account management.