His vintage Pokémon cards beat the S&P 500 inside his solo 401(k), and the IRS still handed him a tax bill the year he bought them. The rule that triggered it has nothing to do with performance.
His vintage Pokémon cards beat the S&P 500 inside his solo 401(k), and the IRS still handed him a tax bill the year he bought them.
The rule that triggered it has nothing to do with performance.
His vintage Pokémon cards beat the S&P 500 inside his solo 401(k), and the IRS still handed him a tax bill the year he bought them. The rule that triggered it has nothing to do with performance.
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A self-employed consultant in his late 50s opened a solo 401(k) years ago to protect income from his one-person business. Later he added a self-directed feature that let him pick each holding. He used it to buy a few professionally graded vintage Pokémon cards. The plan held them, the market for those cards rose, and by his own count the position did better than a broad S&P 500 index fund over the same period.
Then his tax preparer read the plan statements. What comes next depends entirely on the purchase. The federal rule on collectibles in retirement accounts is triggered by the purchase itself, and gains, losses and benchmarks never enter the math.
Why a Solo 401(k) Gives No Shelter From the Collectibles Rule
The collectibles restriction goes beyond IRAs. Under 26 U.S.C. § 408(m)(1), “the acquisition by an individual retirement account or by an individually-directed account under a plan described in section 401(a) of any collectible shall be treated (for purposes of this section and section 402) as a distribution from such account in an amount equal to the cost to such account of such collectible.”
A solo 401(k) is a qualified plan under section 401(a). A self-directed feature that lets the owner choose each asset is a classic individually directed account. That phrase covers the consultant directly, so a solo 401(k) is no workaround for the collectibles rule.
Which Assets Count as Collectibles, and Where Cards Fit
Averytin News Financial update.