Quote from: delta on January 05, 2014, 07:36:52 PM

Quote from: jzcjca00 on January 03, 2014, 06:01:07 AM

If you pay U.S. taxes, you need to be aware that it is possible TODAY to hold bitcoins in your Roth IRA, and there are important tax advantages for doing so!

Most people think that you can only hold stocks and mutual funds in an IRA, and many bitcoin fans are anxiously waiting for approval so they can invest retirement funds in bitcoin through the Winklevoss ETF. What they do not realize is that there is already a way to hold bitcoins in IRAs today!

It takes some effort and expense, but anyone can set up an "IRA LLC," which allows you to hold MANY different types of alternative investments, including bitcoins. It's 100% legal.

There are companies that (for around $1500) will help you set up a self-directed IRA (traditional, Roth, etc.), plus an IRA legal liability company (IRA LLC) for managing the investments. Your IRA is the sole owner of the LLC, and you are the manager. Your IRA LLC can invest in a wide variety of things, like real estate, gold, silver, and even bitcoins.

It's not a trivial undertaking. There are a few things you cannot invest in (life insurance, collectibles, etc.), and there are certain kinds of transactions that are prohibited. But you can buy and sell bitcoins on exchanges, hold them in cold storage, etc. And the tax advantages make it worth the effort and expense.

In particular, if the price of bitcoin increases substantially, a Roth IRA LLC can completely eliminate capital gains taxes, so if you do become a Bitcoin millionaire, you don't have to pay half of it to the U.S. government.

If you have thousands of dollars worth of bitcoins, you should consider using an IRA LLC to make sure you get to keep the gains!

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jzcjca00,

Is selling my current bitcoins necessary in order to purchase bitcoins into new LLC Roth IRA?
It seems that selling bitcoins that I held for a while leaves me with fiat that I cannot put into the first Roth IRA
due to contribution limits.

Can I just open LLC Roth with fiat from the sale of mutual funds (from your example)?

Unless you are rolling over funds from an existing account then you are limited to depositing $5500/yr into the new IRA. You can buy more BTC with those funds.

I dont think there is any way to convert all of your current BTC assets over to the IRA if it exceeds the yearly contribution limit.

Unfortunately, you will be required to pay taxes on all of your BTC holdings unless they are already under a IRA LLC. No way around that. But the sooner you setup this kind of IRA then the more you can start contributing in this way and not have to worry about future taxes.

That is how I understand it, at least.