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• Your receipt of services at reduced or no cost from the bank where your traditional IRA is established or maintained. Payments of cash, property, or other consideration. Even if a sponsor makes payments to you or your family, there is no prohibited transaction if all three of the follow- ing requirements are met. 1. The payments are for establishing a traditional IRA or for making additional contributions to it. 2. The IRA is established solely to benefit you, your spouse, and your or your spouse's beneficiaries. 3. During the year, the total fair market value of the pay- ments you receive isn’t more than: a. $10 for IRA deposits of less than $5,000, or b. $20 for IRA deposits of $5,000 or more. If the consideration is group term life insurance, require- ments (1) and (3) don’t apply if no more than $5,000 of the face value of the insurance is based on a dollar-for-dollar basis on the assets in your IRA. Services received at reduced or no cost. Even if a sponsor provides services at reduced or no cost, there is no prohibited transaction if all of the following require- ments are met. • The traditional IRA qualifying you to receive the serv- ices is established and maintained for the benefit of you, your spouse, and your or your spouse's benefi- ciaries. • The bank itself can legally offer the services. • The services are provided in the ordinary course of business by the bank (or a bank affiliate) to customers who qualify but don’t maintain an IRA (or a Keogh plan). • The determination, for a traditional IRA, of who quali- fies for these services is based on an IRA (or a Keogh plan) deposit balance equal to the lowest qualifying balance for any other type of account. • The rate of return on a traditional IRA investment that qualifies isn’t less than the return on an identical in- vestment that could have been made at the same time at the same branch of the bank by a customer who isn’t eligible for (or doesn’t receive) these services. Investment in Collectibles If your traditional IRA invests in collectibles, the amount in- vested is considered distributed to you in the year inves- ted. You may have to pay the 10% additional tax on early distributions discussed in Pub. 590-B. Any amounts that were considered to be distributed when the investment in the collectible was made, and which were included in your income at that time, aren’t in- cluded in your income when the collectible is actually dis- tributed from your IRA. Collectibles. These include: • Artworks, • Rugs, • Antiques, • Metals, • Gems, • Stamps, • Coins, • Alcoholic beverages, and • Certain other tangible personal property. Exception. Your IRA can invest in one, one-half, one-quarter, or one-tenth ounce U.S. gold coins, or one-ounce silver coins minted by the Treasury Depart- ment. It can also invest in certain platinum coins and cer- tain gold, silver, palladium, and platinum bullion. Unrelated Business Income An IRA is subject to tax on unrelated business income if it carries on an unrelated trade or business. An unrelated trade or business means any trade or business regularly carried on by the IRA or by a partnership of which it is a member. If the IRA has $1,000 or more of unrelated trade or business gross income, the IRA trustee is required to file a Form 990-T, Exempt Organization Business Income Tax Return. The Form 990-T must be filed by the 15th day of the 4th month after the end of the IRA’s tax year. See Pub. 598, Tax on Unrelated Business Income of Exempt Organizations, for more information. Excess Contributions Generally, an excess contribution is the amount contrib- uted to your traditional IRAs for the year that is more than the smaller of: • $5,500 ($6,500 if you are age 50 or older), or • Your taxable compensation for the year. The taxable compensation limit applies whether your contributions are deductible or nondeductible. Contributions for the year you reach age 701/2 and any later year are also excess contributions. An excess contribution could be the result of your con- tribution, your spouse's contribution, your employer's con- tribution, or an improper rollover contribution. If your em- ployer makes contributions on your behalf to a SEP IRA, see chapter 2 of Pub. 560. Tax on Excess Contributions In general, if the excess contributions for a year aren’t withdrawn by the date your return for the year is due (in- cluding extensions), you are subject to a 6% tax. You must pay the 6% tax each year on excess amounts that remain in your traditional IRA at the end of your tax year. Page 34 Chapter 1 Traditional IRAs