Author Topic: If you have both an IRA account and a taxable account...  (Read 6360 times)

SarahV

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If you have both an IRA account and a taxable account...
« on: November 27, 2012, 12:26:32 AM »
I want to put my 2013 IRA contribution into Lending Club instead of stocks/bonds/REITs like I usually do. So in January I'm planning on starting a Lending Club IRA.

But first I have a question: is it possible to transfer cash directly from a taxable Lending Club account to a Roth IRA account, or would I have to withdraw the money to my bank account and re-deposit it into the IRA?  I'd like to eventually have all my LC money in retirement accounts, but since it's not very liquid it would have to be moved bit by bit unless I want to do a mass sell-off and re-buy everything and pay all the fees involved with that (ugh).

I am assuming I can't just transfer notes from one to the other because that would be way too convenient for me...  ;)

yojoakak

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Re: If you have both an IRA account and a taxable account...
« Reply #1 on: November 27, 2012, 01:25:37 AM »
If you sell any of the notes in your taxable account MAKE SURE YOU DO NOT BUY those notes in your IRA.


"Between November 24 and December 10, 1999, Moondra executed 56 wash sales in the securities of 12 different issuers between taxable and tax-sheltered accounts in which he had trading authority. These trades resulted in no change in beneficial ownership but created artificial losses of approximately $161,695 in the taxable accounts and artificial gains of approximately $161,695 in the tax-sheltered accounts. "

http://www.sec.gov/litigation/admin/34-48432.htm

brycemason

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Re: If you have both an IRA account and a taxable account...
« Reply #2 on: November 27, 2012, 10:19:08 AM »
The SEC is not upset that Rajan bought and sold the same securities to himself, but for the fact he did it not at the current market price in order to generate artificial losses in his taxable account (that he would get a tax benefit from) and artificial gains in his non taxable account (that were tax deferred).

Keltset

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Re: If you have both an IRA account and a taxable account...
« Reply #3 on: November 27, 2012, 01:33:04 PM »
It's perfectly legal to move the security at market value- It's when he chose to re-value notes that it becomes potentially a very large problem.

The problem is as was stated above, the artificially re-valuation of the security which results in a tax benefit not once, but twice. They get the devalued amount of the security moved to a contribution limited account and taking loss on the security on the taxable side... That my friends is fraud.

edit: I'm not a professional nor should my opinion be considered as such... as always it is wise to consult an accounting professional in matters such as this...

yojoakak

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Re: If you have both an IRA account and a taxable account...
« Reply #4 on: November 27, 2012, 01:43:51 PM »
The SEC is not upset that Rajan bought and sold the same securities to himself, but for the fact he did it not at the current market price in order to generate artificial losses in his taxable account (that he would get a tax benefit from) and artificial gains in his non taxable account (that were tax deferred).

As anyone who has used Foliofn will tell you, it's a VERY ILLIQUID market.

One could very easily set an absurdly low price on a note and buy it in their other account. Even in the middle of the day.

Arguing that you sold a note to yourself at "market price" would be, at best, a difficult sell (excuse the pun).
« Last Edit: November 27, 2012, 01:47:11 PM by yojoakak »

SarahV

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Re: If you have both an IRA account and a taxable account...
« Reply #5 on: November 27, 2012, 02:10:09 PM »
Not to detract from your lovely discussion of how I could break the law, but does anyone know the answer to the question I actually asked?  :)

Quote
But first I have a question: is it possible to transfer cash directly from a taxable Lending Club account to a Roth IRA account, or would I have to withdraw the money to my bank account and re-deposit it into the IRA? 

DanB

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Re: If you have both an IRA account and a taxable account...
« Reply #6 on: November 27, 2012, 02:35:24 PM »
As far as I know, the answer is no, you cannot transfer cash from one account to another directly.

SarahV

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Re: If you have both an IRA account and a taxable account...
« Reply #7 on: November 27, 2012, 02:51:22 PM »
Thanks, Dan! I figured that would make it too easy for me... will have to do it the hard way!

yojoakak

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Re: If you have both an IRA account and a taxable account...
« Reply #8 on: November 27, 2012, 02:54:47 PM »
Not to detract from your lovely discussion of how I could break the law, but does anyone know the answer to the question I actually asked?  :)


Sorry. I didn't think you would be asking a question which could easily have been looked up on LendingClub's website:

"Can I transfer money from my regular investing account to my IRA account?"
http://www.lendingclub.com/kb/index.php?View=entry&EntryID=152
« Last Edit: November 27, 2012, 03:04:11 PM by yojoakak »

SarahV

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Re: If you have both an IRA account and a taxable account...
« Reply #9 on: November 27, 2012, 03:58:56 PM »
Easily? I googled for an answer, nothing useful came up in the first couple of pages of results. I searched the help files at lending club for "IRA" to find the FAQs pertaining to IRA accounts, and it said "There are no records specified for your criteria". So apparently their search is broken. I looked under "Funding Your Account" and there is nothing helpful there either. At that point I wasn't sure where else to look and I thought someone here might already know the answer and posted a question.

Sorry if I inconvenienced you by asking a question so "easy" that no one would answer it for 12+ hours until Dan came along. I guess the rest of you knew the answer all along and were just being coy ::)

thezinfan

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Re: If you have both an IRA account and a taxable account...
« Reply #10 on: November 28, 2012, 12:22:16 PM »
Sarah, keep in mind that if you do open an LC IRA, you also will need to deposit  an additional 5k in 2014. If the balance is less than 10k after a year, you'll get charged an IRA fee.

Lending Clubís preferred IRA custodian is SDIRA Services, a subsidiary of Horizon Bank. To qualify for a No-Fee IRA through SDIRA Services you must have an initial minimum balance of $5,000 or more in Lending Club Notes and maintain this minimum invested balance for the first 12 months. To continue to qualify for the No-Fee IRA after the first year, you must maintain an invested balance of $10,000 or more in Lending Club Notes. All account balances are determined as of the last business day immediately prior to the anniversary date of the opening of your account. An annual fee of $100 applies to accounts that donít meet these requirements.

I actually waited until early in the year to invest in IRA account at LC, so i could immediately give them 2 years worth of IRA money. In other words, you might want to wait until Jan to open the IRA. I'm not a tax attorney...blah..blah....blah.

DanB

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Re: If you have both an IRA account and a taxable account...
« Reply #11 on: November 28, 2012, 12:30:22 PM »
Sarah...........You're more than welcome.

SarahV

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Re: If you have both an IRA account and a taxable account...
« Reply #12 on: November 28, 2012, 01:32:23 PM »
Thanks, thezinfan. I already funded this year's IRA back in January, so I can't fund anything else until 2013 anyway. I think I will probably put in the max in Jan or Feb ($5500) and then hopefully will only have to put in about $4000 to top it up to $10k at the beginning of 2014.