Author: Adam Bergman

Can You Invest in Trading Cards With Your Retirement Funds in 2026? A Tax Lawyer's Analysis of Whether a ROBS Structure May Provide the Answer

Trading cards are no longer just childhood collectibles. Over the last decade, baseball, basketball, football, soccer, Pokemon, Magic: The Gathering, and other rare cards have evolved into a legitimate alternative asset class, with auction records falling, institutional investors entering the market, and professional grading turning a hobby into a sophisticated marketplace. Some of the rarest cards now sell for hundreds of thousands, even millions, of dollars, and investors increasingly view them the way they view fine art, rare automobiles, or precious metals: assets with limited supply, strong demand, and real long-term appreciation potential.

As the father of two sons who are passionate about trading cards, and a tax attorney who has spent more than twenty-five years helping clients use Self-Directed IRAs and Solo 401(k) plans to invest in alternative assets, I'm increasingly asked a simple question.

Can I use my retirement funds to invest in trading cards?

The answer, unfortunately, is not simple.

If you own a Self-Directed IRA, the Internal Revenue Code generally prohibits your IRA from purchasing collectibles directly, and trading cards almost certainly fall within that prohibition. That part of the law is relatively clear.

A more interesting question is what happens if your retirement funds don't purchase trading cards directly at all. What if your retirement plan instead invested in the stock of a C corporation that operates a legitimate trading card business, through a Rollovers as Business Startups ("ROBS") structure? Would the retirement plan own collectibles, or would it simply own corporate stock while the corporation owned the cards? Surprisingly, neither the IRS nor the courts have directly answered that question.

As with many areas of tax law, the answer requires looking beyond a single Code section, and instead understanding how the IRS collectibles rule under Section 408(m), the prohibited transaction rules under Section 4975, qualified employer securities under Section 4975(d)(13), corporate law principles, and the Department of Labor's Plan Asset Regulation all interact. In my view, while there is no published authority specifically approving a ROBS-funded trading card business, the structure presents one of the strongest legal frameworks for analyzing whether retirement funds may participate in this rapidly growing industry.

Why Investors Want to Use Retirement Funds

One of the biggest advantages of investing through a retirement account is the favorable tax treatment Congress created to encourage Americans to save. A Traditional IRA lets gains compound tax-deferred, so every dollar that would otherwise go to taxes keeps earning returns year after year. A Roth IRA can be even better: qualified distributions, including decades of appreciation, may come out completely tax-free. Solo 401(k) plans offer similar advantages with much larger contribution limits for self-employed owners.

That tax-efficient compounding is exactly why so many retirement investors have expanded beyond stocks and mutual funds into real estate, private equity, cryptocurrency, precious metals, private lending, and privately held businesses. Trading cards have increasingly entered that conversation: like fine art, they derive value from scarcity, condition, and collector demand rather than corporate earnings, making them an appealing diversification tool for a long-term portfolio.

Unfortunately, Congress imposed one important limitation. Unlike real estate or privately held businesses, collectibles generally cannot be purchased directly by an IRA, which is a rule worth understanding in more detail.

Why an IRA Generally Cannot Purchase Trading Cards Directly

The starting point is Internal Revenue Code Section 408(m), the IRS collectibles rule. Congress enacted it because it wanted retirement accounts used for retirement savings, not personal enjoyment, and was concerned that taxpayers could buy art, antiques, or jewelry inside an IRA and enjoy those assets while keeping favorable tax treatment. Section 408(m) generally provides that if an IRA acquires a collectible, the amount invested is treated as a taxable distribution in the year of purchase, and depending on the owner's age, that deemed distribution may also trigger a 10% early distribution penalty.

Section 408(m) defines collectibles broadly: works of art, rugs, antiques, most metals and gems (subject to statutory exceptions for certain precious metals), stamps, alcoholic beverages, and other tangible personal property the IRS specifies. The statute does not name trading cards specifically, but baseball, basketball, football, Pokemon, and Magic: The Gathering cards would almost certainly be treated as collectibles. So if a Self-Directed IRA simply bought a rare Mickey Mantle rookie card or a valuable Pokemon card directly, there is a substantial risk the IRS would treat it as a taxable distribution.

Many investors stop the analysis there and conclude retirement funds simply cannot touch this market, and from a direct-ownership standpoint, that's correct. But the precise wording of the statute matters: Section 408(m) prohibits an IRA from acquiring a collectible, but it does not expressly prohibit an IRA or qualified plan from purchasing stock of a corporation that, in turn, owns collectibles. That distinction matters because corporations are separate legal entities under both state corporate law and federal tax law. A shareholder owns shares of stock, not the corporation's underlying assets; if you own Apple stock, you don't personally own Apple's buildings or patents. The same principle applies to a closely held corporation: if a C corporation buys trading cards, it is the corporation, not its shareholders, that owns those cards.

That raises the real question: could a retirement plan invest in the stock of a C corporation that acquires, grades, markets, and sells trading cards, rather than purchasing the cards directly? The idea is straightforward in concept, but it leaves a practical question unanswered: how would a retirement plan actually get money into a newly formed corporation's stock in the first place, without that transaction creating its own tax problems? That is where ROBS comes in. ROBS is not a workaround invented for this article. It is an existing, IRS-recognized structure that entrepreneurs have used for decades to move retirement savings into a new operating business, whether a restaurant, a franchise, or a manufacturing company. Because that mechanism already exists and already works for other kinds of operating businesses, the natural next question is whether it works the same way for a business built around trading cards. Answering that means moving past Section 408(m) alone and into the rules governing ROBS transactions, prohibited transactions, qualified employer securities, and the Department of Labor's Plan Asset Regulation.

How a ROBS Structure Works

A Rollovers as Business Startups ("ROBS") arrangement is an IRS-recognized method of using qualified retirement funds to capitalize a new business without triggering taxes or early distribution penalties, provided it's properly structured and operated. Unlike a Self-Directed IRA, which typically purchases an investment directly, a ROBS structure involves an employer-sponsored qualified retirement plan and generally follows four steps.

First, a new C corporation is formed, because only a C corporation can issue "qualified employer securities" that a qualified retirement plan can purchase under the ROBS framework. Second, the corporation adopts a new qualified 401(k) plan. Third, the individual rolls over funds from an existing eligible retirement account into that new plan, a qualified rollover that is generally tax-free. Finally, the 401(k) plan purchases newly issued shares of stock in the C corporation, and the corporation receives cash in exchange to operate its business.

That distinction is critical: the retirement plan is not purchasing inventory, equipment, or trading cards. It is purchasing qualified employer securities, namely stock issued by the C corporation. The corporation then uses that capital to run its business, whether that's a restaurant, a franchise, a manufacturing company, or, potentially, a trading card business that buys, grades, markets, and sells collectible cards. From a legal standpoint, the retirement plan owns shares of corporate stock. The corporation owns the trading cards.

That stock-versus-assets distinction rests on a basic principle of corporate law: a shareholder owns shares, not the corporation's underlying assets, whether the corporation manufactures cars, owns real estate, or, in this case, holds trading cards. But because the shareholder here is a retirement plan, the question doesn't end with ordinary corporate law. ERISA and the Department of Labor apply their own separate test for deciding when a retirement plan is treated as owning only stock versus owning a company's underlying assets, called the Plan Asset Regulation. That regulation, more than Section 408(m) itself, is where the real complexity of this issue lives.

The Plan Asset Rules: The Most Overlooked Issue

Most articles on this topic stop after quoting Section 408(m) and conclude retirement accounts simply cannot own trading cards. That's incomplete, because whenever a qualified retirement plan invests in a business, the Plan Asset Regulation asks a further question: does the plan own only the stock of the company, or is it treated as owning the company's underlying assets? As a general rule, a retirement plan that purchases stock owns the stock, not the corporation's assets, so if the corporation later buys trading cards as inventory, the corporation, not the plan, is the legal owner.

The Operating Company Exception

The Plan Asset Regulation generally does not look through investments in bona fide operating companies; it focuses on entities whose principal purpose is holding investment assets for passive investors. A corporation that actively runs a trading card business, buying collections, grading cards, marketing, and regularly buying and selling in the ordinary course of business, is conducting an active business, which is a very different situation from an entity formed solely to warehouse collectibles for passive investment. That distinction strengthens the argument that the corporation should be respected as a separate legal entity whose assets belong to the corporation, not the retirement plan.

The 100% Ownership Rule

The analysis gets more complicated when a qualified retirement plan owns all of a corporation's outstanding stock. The Plan Asset Regulation contains a provision that, in certain circumstances, treats an entity's assets as assets of the investing plan when benefit plan investors own all of the equity, which raises the question of whether that also means the plan has "acquired" collectibles under Section 408(m). The answer is far from clear. To my knowledge, neither the IRS nor the Department of Labor has applied the 100% look-through rule to a ROBS-funded trading card corporation, and no court has addressed how Section 408(m) and the Plan Asset Regulation interact here. That silence cuts both ways: it doesn't make the structure automatically permissible, but there is also no authority saying a plan that owns stock in a bona fide operating C corporation should automatically be treated as owning every asset the corporation holds.

In my opinion, the better reading of the Code, the Plan Asset Regulation, and corporate law principles is that a properly structured ROBS transaction involving a bona fide operating C corporation should be analyzed differently from an IRA buying trading cards directly. A qualified retirement plan that acquires stock of a C corporation acquires qualified employer securities, not the corporation's underlying assets, and that distinction is fundamental to both corporate law and the ROBS structure. This isn't about exploiting a loophole; it's about applying established legal principles to a fact pattern the IRS hasn't yet addressed.

Why the Prohibited Transaction Rules Don't Prevent a Properly Structured ROBS Transaction

Some readers may wonder whether Section 4975's prohibited transaction rules block a retirement plan from purchasing stock of a corporation owned by the plan participant, since Section 4975 generally prohibits a plan from buying property from, selling property to, or otherwise transacting with a disqualified person. But Congress specifically carved out an exception for this: Section 4975(d)(13), by reference to ERISA Section 408(e), lets an eligible individual account plan acquire qualified employer securities, provided the stock is bought for adequate consideration and no commission is paid. That exemption is the legal foundation for every properly structured ROBS transaction, and it's why thousands of entrepreneurs have used ROBS to capitalize restaurants, franchises, and other businesses over the past several decades.

The more interesting question isn't whether acquiring employer stock violates Section 4975 (it doesn't, assuming the ROBS is properly maintained), but what assets the retirement plan is considered to own after the corporation is funded. If the plan owns only qualified employer securities and the corporation separately owns and operates a bona fide trading card business, the analysis shifts toward the interaction between Section 408(m), corporate law, and the Plan Asset Regulation.

What About UBIT?

One more tax question deserves a direct answer: does running an active trading card business inside a retirement structure trigger Unrelated Business Income Tax (UBIT)? For many retirement-funded business strategies, the answer is yes. If a Self-Directed IRA or 401(k) owns a pass-through entity, such as an LLC or partnership, that actively operates a trade or business, the income from that business is generally treated as Unrelated Business Taxable Income under Internal Revenue Code Sections 511 through 514, and the retirement account itself owes tax on that income, reported on Form 990-T.

A properly structured ROBS transaction avoids that problem for a different reason. The retirement plan doesn't own a pass-through interest in the business. It owns stock in a C corporation. The corporation itself pays corporate income tax on its trading card business profits, currently at a flat 21% federal rate. Dividends the corporation later pays to the 401(k) plan are generally excluded from Unrelated Business Taxable Income under Section 512(b)(1), regardless of how active the underlying business is. That is one of the real advantages of the ROBS structure over a Self-Directed IRA directly owning an operating business, and it applies the same way whether the C corporation sells software, runs a restaurant, or operates a trading card business.

When a ROBS Structure Presents the Strongest Legal Argument

To my knowledge, there is no published Revenue Ruling, Private Letter Ruling, Treasury Regulation, Tax Court decision, or other IRS guidance directly answering this question. In my opinion, the strongest legal argument exists where the following factors are present:

• The retirement plan acquires only qualified employer securities through a properly structured ROBS transaction.
• The C corporation operates a bona fide trading card business rather than simply holding collectibles for passive investment.
• The corporation follows all corporate formalities and maintains separate books, records, bank accounts, and business operations.
• Trading cards are purchased, graded, insured, marketed, stored, and sold exclusively by the corporation.
• No retirement plan participant or other disqualified person receives any personal use or personal benefit from the trading cards.
• The corporation is respected as a separate legal entity under applicable corporate law principles.

Those facts present the strongest argument that the retirement plan owns corporate stock, not the underlying trading cards. That said, investors should approach this area with caution: the absence of IRS guidance doesn't mean a structure is automatically permissible, and it doesn't mean it's prohibited either. It simply means there's uncertainty, and whenever tax law is unsettled, the right move is to avoid aggressive shortcuts and build a structure supported by existing statutory language, established corporate law principles, and sound business practices.

Conclusion

Trading cards have become far more than childhood collectibles. Today they represent a sophisticated, multi-billion-dollar industry that combines investing, e-commerce, grading, live auctions, and social media, and many people now view them as a legitimate alternative asset class and business opportunity.

The IRS collectibles rules generally prevent IRAs from purchasing trading cards directly, but that doesn't end the discussion. A properly structured ROBS transaction raises a different legal question, because the retirement plan purchases stock of a C corporation rather than acquiring trading cards directly, and whether that distinction removes the transaction from the scope of Section 408(m) has never been directly addressed by the IRS or the courts. In my opinion, a bona fide operating trading card business funded through a properly structured ROBS arrangement presents the strongest legal framework for analyzing this issue under current law. Because the law remains unsettled, investors should proceed carefully and get experienced tax and legal guidance before implementing any such strategy.

by Adam Bergman