Quote:
Originally Posted by pablopluto
I have heard of people getting fined by the IRS because retirement account can not be leveraged against by you
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This is not a simple topic; and definitely not one (just in case anyone gets any ideas) to decide on based off of forum postings.
General the above is correct: you'll find most IRA custodians prohibit use of margin (ask a firm representative for a reference to what article this language is found under in their agreement, if applicable) within IRAs for which they act as trustee/custodian; that is at their discretion. As for people getting fined: that's probably baseless, because a custodian has to permit use of leverage for the participant to take advantage of that option in the first place. It just depends.
Just for the sake of the discussion: look at Article III on Form 5305-A (search for it at
www.irs.gov): this is the bare-bones Traditional IRA IRS model, where you'll notice no explicit reference to anything like forex. As usual with the IRS, things aren't so simple.
Two things then: first, IRS section 4975 (pursuant to 408(a)) addresses prohibited investments within IRAs; this means inclusion or exclusion of foreign exchange as an offering is ultimately based on interpretation of IRS code and regulations. Second, the IRA custodian can (and more than likely has) outline permitted investments/transactions for their IRA product in some detail by adding their own specific provisions to Form 5305-A in Article VIII and possibly an addendum article, effectively resulting in an IRA prototype (a unique variation on the plain IRS model). So, can one trade forex in an IRA? Perhaps; perhaps not.
To look into things further: any IRA prototype document must receive a favorable opinion letter before to allow the custodian to take receipt or otherwise manage assets. Checking with a tax advisor to research and review a firm's IRA documents is the best course of action: custodial agreement, disclosure statement, opinion letter(s), etc. There are highly significant adverse legal implications if a custodian is found to be out of compliance, in which participants (and their assets) can become unwittingly entangled.
Can you render a legally justifiable determination on a firm's documents? In all likelihood, no. Again, it is wise to consult a competent tax advisor for their professional take on things before signing off on any "forex IRA".