How to own cattle in a Self-Directed IRA | Frank Selden Law

How to own cattle in a Self-Directed IRA

You may own cattle in a self-directed IRA! I grew up around dairy farms. During my teenage years I met another teenager who said he also lived "on a farm". As he described life on a cattle ranch, I became awestruck at the differences on a work day between dairy and cattle operations. Do you need to know anything about cattle to invest? Arguably no, if you work with someone you trust who does. There are about 75 different cattle breeds, so lots to choose from. 

McGinnis Meadows Cattle Ranch

Own Cattle That Produce More Cattle

You decide to purchase 50 heifers (a young female cow that has not borne a calf). Each heifer is tagged in a way that is visibly unique to your IRA’s ownership. At the appropriate age for each heifer, they are impregnated using artificial insemination (AI). No bull!  Cattle gestational period is about 8 1/2 to 9 months. Your initial investment includes each head of cattle ($1,000 – $2,000 each depending on breed, location, heritage, etc). medication, AI, feed, and boarding. Total investment for 50 cattle (in addition to the purchase) could run $20,000. If all goes well, 9 months later you have 50 young cattle available to sell. You might choose you love these little buggers so much you want to keep them all (or the best ones) and expand herd size. More realistically, you keep some because there comes a time when cattle stop producing more cattle because of old age or succumbing to one of the numerous ways cattle die.

Segregating your Herd

Your IRA owned cattle do not need to be physically segregated from other cattle. They merely need to be identifiable. In the wild west days, identification was handled by branding. Today, cattle are identified by tags or chips. Tags are pierced in the left ear. The newly born cattle will also need identification, which might differ depending on your decision to keep them versus sell. I highly recommend that you visit your herd periodically, especially at birthing time. Does this mean horse riding, cattle drives and everything else you learned watching City Slicker? It might, depending on where you board your herd.

Where’s the Beef?

What if you want a freezer full of beef for Christmas? You are not allowed to buy one of your cattle. You can’t have one follow you home and name it Norman. Cattle rustling is frowned upon. However, you may take one as a distribution from your IRA. Inform your IRA custodian you took a distribution, they notify the IRS and send you a 1099. Arrange a pick up with the ranch, pay a butcher to do what butcher’s do, and, voila, the beef is in your freezer at a fraction of the cost of paying one of those door to door frozen beef salesmen.

I do not know any cattle ranchers ready to sell and board cattle for you. I do know how to set up your IRA to invest into cattle, or anything else that is not prohibited. I am also happy to share tips about visiting your herd, such as wear boots and watch where you step.

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