Last updated: July 23, 2026 · By White Metal Resources Editorial
Quick answer: McNulty v. Commissioner is a 2021 United States Tax Court opinion, reported at 157 T.C. 10, that shut down the "home storage IRA" reading of the tax code. The court applied Internal Revenue Code section 408(m)(3)(B) literally. It held that IRA metal kept at the account owner's home is a taxable distribution.
A single member limited liability company owned by the IRA did not qualify as an IRS approved trustee under section 408(a). The account balance became taxable in the year the metal moved into personal custody. Accuracy related penalties under section 6662(a) were sustained on top of the tax.
Short on time? The essentials
- McNulty v. Commissioner is a full opinion of the United States Tax Court, cited as 157 T.C. 10, issued in November 2021.
- The taxpayers used a self directed IRA and a wholly owned limited liability company to purchase American Eagle coins.
- Mrs. McNulty then kept those coins at the couple's home, an act the court read as the disqualifying step.
- The court applied the physical possession requirement in IRC section 408(m)(3)(B) directly to the fact of personal custody.
- The IRA owned LLC was not an IRS approved trustee under section 408(a), so its involvement did not cure the custody defect.
- The account balance was treated as a deemed distribution in the year Mrs. McNulty took possession of the metal.
- Accuracy related penalties under section 6662(a) were sustained on top of the ordinary income tax.
- The court's reasoning rests on the statute, so the outcome applies equally to silver, platinum, and palladium IRAs.
- No published federal court decision has narrowed the McNulty holding since 2021, and the IRS Issue Snapshot restates it.
- Any promoter that markets a "home storage IRA" today is describing a transaction McNulty has already read against.
The McNulty lawsuit is the piece of paper that ended the "home storage IRA" argument as a live position in United States tax law. Every promoter selling an IRA structure that keeps metal at a saver's address is now selling a plan that the United States Tax Court has already read against.
This page walks through the case as a legal event: the facts, the court's reading, the tax stack that followed, and what the opinion does and does not decide.
What is McNulty v. Commissioner?
McNulty v. Commissioner is a full opinion of the United States Tax Court, cited as 157 T.C. 10 and issued in November 2021. A full Tax Court opinion is a "T.C." decision, which is the format the court uses for cases the Chief Judge decides carry precedential weight for the whole court. It is not a memorandum opinion.
The case answered a question that had been argued in marketing brochures for years. May an IRA owner set up a self directed IRA, form a limited liability company owned by the IRA, buy IRA eligible coins through that LLC, and then keep the coins at home? The court's answer was no. Personal custody by the account owner produces a taxable distribution under section 408(m)(3).
McNulty matters because it took the promoter argument out of a marketing pamphlet and put it in front of a federal court. The court rejected it on the plain words of the statute. There is now a published precedent a taxpayer, the IRS, or an advisor can cite by name.
What actually happened in the McNulty case
The taxpayers were Andrew and Donna McNulty. Mrs. McNulty opened a self directed traditional IRA and directed the IRA to fund a wholly owned limited liability company. The IRA held the LLC's membership interest. Mrs. McNulty served as the LLC's manager.
She then used LLC funds to buy gold and silver American Eagle coins from a dealer. Rather than routing those coins to an IRS approved depository, she took physical possession of them and stored them at the McNulty residence. The paperwork tracked back to the IRA. The physical metal did not.
The Commissioner examined the returns and treated the coin purchases as a taxable distribution from the IRA in the year Mrs. McNulty took custody. The Commissioner also proposed accuracy related penalties under section 6662(a). The McNultys petitioned the Tax Court to contest both positions. That petition is the case now cited as 157 T.C. 10.
Worth knowing: the setup on paper was the same "checkbook control IRA LLC" that promoters still sell today. The court did not reject the paperwork. It rejected the outcome the paperwork produced once the physical metal reached the account owner's hands.
The two step section 408(m)(3) test the court applied
Section 408(m)(3) of the Internal Revenue Code carves narrow slices out of the "collectible" rule for IRAs. The carve out has two independent conditions. A coin or bar must clear both to stay inside an IRA without a deemed distribution.
The first condition is eligibility. The metal must be gold, silver, platinum, or palladium, and it must meet the fineness minimum drawn from commodity market delivery standards. Certain United States sovereign coins qualify separately under a carve out that runs through 31 U.S.C. section 5112. The American Gold, Silver, and Platinum Eagles clear this test.
The second condition is custody. The bullion must be in the physical possession of a trustee described in section 408(a). Section 408(a) defines that trustee as a bank or an IRS approved non bank trustee. The chart below shows how the two conditions sit next to each other, and where the McNulty facts landed on each.
Under the court's reading, the American Eagle coins Mrs. McNulty bought passed step one. Silver and Gold Eagles are on the 31 U.S.C. section 5112 list of United States sovereign coins the statute admits. The eligibility question was never the fight. The fight was step two.
Step two failed because a person, not a section 408(a) trustee, held the coins. The court declined to read the LLC's role as a substitute for that trustee. Personal custody is what the statute forbids. The court held that a taxable distribution follows the moment the physical possession requirement is broken.
Why the LLC and safe deposit box arguments lost
The McNultys did not argue that a person can hold IRA metal at home. They argued that the LLC held the coins on the IRA's behalf, and that the LLC's ownership of the coins satisfied the physical possession requirement even though a natural person had physical custody. The court read that structure narrowly.
Two threads sank the argument. The first was the definition of a section 408(a) trustee. That definition names a bank or an IRS approved non bank trustee. A single member LLC owned by an IRA and managed by the account owner is not on that list. The court declined to treat the LLC as if it were.
The second was the "unfettered command" of the coins. Even if the LLC formally owned the coins, Mrs. McNulty held them in her hands, could sell them, could move them, and could dispose of them at will. That degree of control by the IRA owner is the reason section 408(m)(3)(B) requires a trustee to hold the metal in the first place. Constructive receipt attaches to the person, not to the paperwork.
Reading the case: a bank safe deposit box argument would have failed for the same reason. A generic box lease is a landlord tenant relationship between the bank and the box holder. The bank is not a trustee for the metal; the box holder is the possessor. McNulty did not reach that specific facts pattern, but its logic covers it.
| Issue | Taxpayer position | Tax Court holding | Outcome |
|---|---|---|---|
| Coin eligibility | American Eagle coins qualify under 31 U.S.C. section 5112. | Not disputed by the court on these facts. | Step one of section 408(m)(3) satisfied. |
| Physical possession by the LLC | The IRA owned LLC held the coins for the IRA. | The LLC was not a section 408(a) trustee. Personal custody by the manager broke the physical possession rule. | Step two of section 408(m)(3) failed. |
| Deemed distribution | No distribution occurred; the coins stayed in the IRA structure. | Taking possession is a deemed distribution equal to the coins' cost basis to the IRA. | Distribution taxed as ordinary income for the year of custody. |
| Accuracy related penalty | Reliance on the promoter and the LLC structure excused any penalty. | Reliance did not meet the reasonable cause standard on facts that contradicted the statute. | Section 6662(a) penalty sustained. |
Source: McNulty v. Commissioner, 157 T.C. 10 (2021); 26 U.S.C. section 408; IRS Investments in Collectibles Issue Snapshot. Checked June 2026.
The tax and penalty stack the court sustained
The tax exposure a McNulty type finding produces is stacked, not single line. The Tax Court's ruling touched three layers, each anchored in a different code section. Understanding the shape of the stack matters because promoters often quote only the first line.
The first layer is the deemed distribution itself. The taxable amount equals the account balance or cost basis that moved into personal custody. That amount is added to ordinary income for the year the metal entered the owner's hands. The rate that applies is the owner's marginal federal bracket for that year.
The second layer is the section 72(t) additional tax. An account owner younger than age 59.5 owes a 10 percent federal additional tax on the same distribution, unless a narrow Publication 590-B exception applies. A failed physical possession structure is not one of those exceptions. State income tax stacks separately on top of both federal layers.
The third layer is the accuracy related penalty under section 6662(a). The McNulty court sustained a 20 percent penalty on the underpayment. Reliance on the promoter's opinion did not qualify as reasonable cause, because the promoter's reading contradicted the plain statutory language. Interest also accrues from the year the distribution should have been reported.
A worked look at the 72(t) piece at four account balances
The 72(t) layer is where the McNulty type stack punishes pre retirees the most. Isolating it from ordinary income tax makes the sensitivity easier to see. The math below moves only one variable: the balance the IRS treats as distributed.
Picture an IRA owner younger than age 59.5 whose precious metals IRA is read against the McNulty holding. Ordinary income tax on the deemed distribution stacks on top of these figures at the owner's marginal federal bracket, plus any state tax. Only the section 72(t) layer is shown.
- On a 50,000 dollar balance treated as distributed: 10 percent times 50,000 equals 5,000 dollars in section 72(t) additional tax.
- On a 100,000 dollar balance: 10 percent times 100,000 equals 10,000 dollars in section 72(t) additional tax.
- On a 250,000 dollar balance: 10 percent times 250,000 equals 25,000 dollars in section 72(t) additional tax.
- On a 500,000 dollar balance: 10 percent times 500,000 equals 50,000 dollars in section 72(t) additional tax, on top of ordinary income tax on the same 500,000 dollars.
Figures are illustrative, not a quote from any specific company and not a tax opinion for any specific taxpayer. Consult a licensed tax advisor for your situation. Real brackets, exception eligibility, and penalty outcomes vary.
How McNulty applies to silver, platinum, and palladium IRAs
The coins in the McNulty case were gold and silver American Eagles. Some readers hear "American Gold Eagle" and assume the ruling is a gold IRA case only. It is not. The court's reasoning rests on section 408(m)(3)(B), which names all four IRA eligible metals in one sentence.
Section 408(m)(3)(B) allows any gold, silver, platinum, or palladium bullion that meets the fineness minimum, if the metal is in the physical possession of a trustee described in section 408(a). The custody rule is the same rule for all four metals. Silver .999 bars, platinum .9995 coins, and palladium .9995 bars are covered by the same trustee requirement as gold.
The sovereign coin carve out at 31 U.S.C. section 5112 lists the American Silver and Platinum Eagles alongside the Gold Eagle. Those white metal Eagles pass step one on the sovereign coin path, the same way the Gold Eagle does. They still have to sit in the physical possession of an IRS approved trustee to remain inside an IRA.
A saver deciding between a silver, platinum, or palladium IRA can therefore not treat McNulty as a gold only precedent. Any promoter that says the holding "does not apply to silver" or "does not apply to palladium" is describing a distinction the statute does not draw.
What McNulty does not decide
The ruling is precise about what it covers. Reading it accurately means naming what it does not decide as well.
The court did not hold that a section 408(a) trustee cannot use a limited liability company at all. Certain IRS approved non bank trustees operate through corporate vehicles, and the McNulty court did not disturb that model. The holding is about a single member LLC that the IRA owner controlled and used to take personal custody.
The court also did not reach the question of whether a bank safe deposit box, on its own, satisfies the physical possession rule. That fact pattern was not before it. Practitioner commentary has read the McNulty logic as fatal to the box lease theory, and the IRS Issue Snapshot rests on the same statutory language. The direct holding, however, is narrower than the practical takeaway.
Finally, the case did not address administrative remedies for a saver who already keeps IRA metal at home and wants to correct the position. Corrective options depend on the year of custody, the account balance, and the owner's bracket and age. A licensed tax professional is the right first call.
Is your rollover source on the compliant path?
The way most savers stay clear of McNulty type exposure is a compliant rollover to an IRS approved custodian and depository. The calculator below is a first pass check of whether the retirement account you plan to move is eligible to roll into a precious metals IRA at all. No numbers are stored, and no CTA is served on this page.
Can you roll your account into a precious metals IRA? Eligibility checker
Most retirement money can move into a precious metals IRA once it is an eligible rollover distribution. Pick your account and situation for a general answer. Always confirm the specifics with your plan administrator or custodian.
General guidance only, not tax or financial advice. Eligibility depends on your specific plan document and IRS rules; confirm with your plan administrator and a tax advisor. A direct trustee-to-trustee transfer avoids the 60-day rule and 20% withholding.
An eligible source is only the first gate. A compliant rollover also needs a direct trustee to trustee transfer, an IRS approved receiving custodian, and an IRS approved depository as the physical possession party. The four step reading routine below matches the reading the Tax Court used in McNulty and helps a saver test any proposed structure the same way.
- Identify the metal on the section 408(m) list. Only gold, silver, platinum, and palladium are on the statutory list. Rhodium and iridium never qualify. If the metal is not listed, the account structure fails on the first line.
- Verify the fineness minimum or the sovereign coin carve out. Gold at .995, silver at .999, and platinum or palladium at .9995 clear the commodity market standard. Silver, Gold, and Platinum American Eagles clear the 31 U.S.C. section 5112 carve out.
- Confirm physical possession is with an IRS approved trustee under section 408(a). That trustee is a bank or an IRS approved non bank trustee. An LLC owned by the IRA, a personal safe, or a generic bank safe deposit box does not qualify.
- Check that the account statement shows depository custody, line by line. Statements should list each item held by the depository under the IRA's name and account number. Customer held positions on IRA metal describe a McNulty type failure in advance.
Any structure a promoter presents can be walked through those four lines. A structure that clears all four is compliant. A structure that fails on line three or four is the pattern the court saw in McNulty. Related guides go deeper on each: custodians, approved depositories, and the direct rollover walkthrough.
When acting on any home storage reading is a bad idea
A balanced look has to name situations where an aggressive reading of the tax code around home storage is an especially poor call, even by the pitch's own logic. Saying so plainly is part of an honest page. There is no call to action in this section on purpose.
- You are under age 59.5. The 10 percent section 72(t) additional tax is the piece of the stack that grows fastest, and the exception list in Publication 590-B does not cover a failed physical possession structure.
- Your rollover balance is large. A deemed distribution scales with the balance. On a 250,000 dollar or 500,000 dollar account, the year one federal event runs into five or six figures before any state tax or penalty.
- You plan to leave the account to a spouse or heirs. A McNulty type finding turns the IRA into a distribution that a spouse or heir has to help clean up. It also erases the tax deferral that would otherwise pass to the next generation.
- A promoter waves an opinion letter as the answer. The Tax Court in McNulty read a promoter opinion against the plain words of section 408(m)(3)(B). No opinion letter overrides a published Tax Court decision.
- Your account is in or near an IRS examination cycle. The physical possession trail is documented on dealer invoices, shipping records, and custodian statements. That is one of the easier audit trails to reconstruct.
If any of these describes your situation, slowing down is the sensible call. A licensed tax advisor is the right first stop, not a marketing landing page. The account, once triggered as a deemed distribution, is difficult to unwind after the fact.
McNulty questions, answered
What is McNulty v. Commissioner in one sentence?
McNulty v. Commissioner is a 2021 United States Tax Court opinion, cited as 157 T.C. 10, holding that an IRA owner who takes personal custody of IRA metal, even through an IRA owned LLC, triggers a taxable distribution under Internal Revenue Code section 408(m)(3). Accuracy related penalties under section 6662(a) were sustained on top.
Did the IRA owned LLC in McNulty count as a section 408(a) trustee?
No. The court held that a single member LLC owned by the IRA and managed by the account owner is not a bank or an IRS approved non bank trustee under section 408(a). The LLC form did not cure the fact that a person had physical custody of the coins.
Does McNulty apply only to gold IRAs?
No. The court's reasoning rests on section 408(m)(3)(B), which lists gold, silver, platinum, and palladium in the same sentence and applies the same physical possession requirement to all four. A silver IRA, a platinum IRA, or a palladium IRA fails the same test if the account owner takes custody.
What was the tax and penalty stack the McNulty court sustained?
Ordinary income tax on the deemed distribution equal to the coins' cost basis. A section 72(t) 10 percent additional tax where applicable to a pre 59.5 owner. Plus an accuracy related penalty under section 6662(a) on the underpayment. State income tax stacks separately on top of the federal layers.
Has any federal court walked McNulty back since 2021?
No published federal court decision has narrowed the McNulty holding since it was issued. The IRS Investments in Collectibles Issue Snapshot rests on the same section 408(m)(3)(B) language and cites the physical possession requirement directly. Practitioner commentary treats McNulty as the leading precedent.
Does McNulty forbid every LLC structure inside an IRA?
No. The ruling addresses a single member LLC that the account owner controlled and used to take personal custody of IRA metal. It does not bar every use of a corporate vehicle by an IRS approved non bank trustee. The disqualifying step in McNulty was personal custody by the account owner, not the LLC form.
Can a promoter’s opinion letter shield me from McNulty?
No. The McNulty taxpayers relied on a promoter opinion and the Tax Court still sustained accuracy related penalties. Reliance on advice that contradicts the plain words of the statute did not meet the reasonable cause standard. An opinion letter is not a defense to a published Tax Court decision on the same fact pattern.
What should a saver do if they already keep IRA metal at home?
Speak with a licensed tax professional at once. The exposure depends on the year the metal entered personal custody, the account balance at that moment, the owner's age, and the marginal bracket. A qualified advisor can walk through corrective options and the reporting positions available. Nothing here is tax advice.
Sources
- United States Tax Court, McNulty v. Commissioner, 157 T.C. 10 (2021), full opinion. Checked June 2026.
- Cornell Legal Information Institute, 26 U.S.C. section 408 (including 408(a) trustee and 408(m)(3)(B) bullion custody). Checked June 2026.
- IRS, Investments in Collectibles in Individually Directed Qualified Plan Accounts (Issue Snapshot). Checked June 2026.
- Cornell Legal Information Institute, 26 U.S.C. section 72(t), 10 percent additional tax on early distributions. Checked June 2026.
- Cornell Legal Information Institute, 26 U.S.C. section 6662, accuracy related penalty on underpayments. Checked June 2026.
- IRS, Publication 590-B, Distributions From Individual Retirement Arrangements. Checked June 2026.
- Cornell Legal Information Institute, 31 U.S.C. section 5112, United States sovereign coin denominations. Checked June 2026.
