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Can Your SDIRA Own Bitcoin?

October 11, 2019


Can my self-directed IRA own Bitcoin?
I’ve been getting that question a lot.
The answer is, “yes.”
Should it?
I have no idea.
Bitcoin’s gone from 30 cents in 2011 to $2500
per Bitcoin as of right now as of July 2017.
A lot of investors have been interested and
wanted to know whether their self-directed
IRA can own and invest in Bitcoin.
Now, the answer is, “yes.”
I want to give you some detail on that.
IRAs are only restricted from investing in
a few things: Life insurance, collectible
items and S-Corporation stock.
Now, collectible items include tangible property,
like: Art, wine collections, antique cars,
stuff like that.
The IRS has restricted those types of investments.
But, Bitcoin is a virtual currency.
Certainly intangible property.
Because there’s no restriction on that type
of asset, IRAs therefore can own virtual currency.
Now, frankly, I don’t think the tax code or
the IRS even envisioned virtual currency.
So, they haven’t made any laws about it.
So, it is okay as of present, your IRA can
actually own and invest in Bitcoin.
Now, there’s two other things I want you to
know.
First, the IRS has issued a notice called
“IRS Notice 2014-21,” which essentially said
Bitcoin or other forms of virtual currency
are property and if you sell them for a gain,
as long as it was a capital asset or investment,
you simply have capital gains tax.
And, that works great for IRAs if they own
and invest in them, and then sell them for
profit.
It then goes back into the IRA, no tax, you’ve
got an IRA.
But, the IRS notice did not address whether
an IRA can in fact own Bitcoin.
Now, again, the rules do not restrict it,
so, yes, you are permitted to own it.
I’m just saying there have been no specific
items from the IRS on that question.
Now, the second thing you want to know is,
“How do I actually own it?”
Now, the best way to own Bitcoin is by using
an IRA/LLC and a Coinbase wallet.
The way this works is you’re first going to
set up a self-directed IRA.
Roll over your other IRA or 401(k) funds into
your self-directed IRA.
Step two: You’re going to set up an IRA/LLC.
That’s something our office does.
We charge 800 bucks for what’s called an “IRA/LLC.”
Step three: You’re going to set up an LLC
bank account.
That LLC bank account is just a regular LLC
checking account, but it’s going to be linked
to a Coinbase wallet.
Coinbase is where you can exchange dollars
in the LLC bank account for Bitcoin.
You can also sell your Bitcoin for dollars
through Coinbase.
That money would go back into your LLC bank
account.
So, yes, your self-directed IRA can own Bitcoin
or other forms of virtual currency.
Whether you should, I don’t know, seek a financial
advisor and make the decisions for yourself.
Thanks for watching.
Please go to my website to learn more about
how you can take control of your retirement.

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