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Lending Club Discussion => Investors - LC => Topic started by: core on October 13, 2013, 07:21:44 PM

Title: Folio and IRAs
Post by: core on October 13, 2013, 07:21:44 PM
LC's site says that Folio trading is not allowed in an IRA.  But that snippet didn't appear until some time last year as I recall, and I haven't heard a peep about this from anyone here.  I know you can't open a Folio-only IRA if you live in one of "those" states, but I'm just talking about being able to liquidate notes in a regular LC IRA account if the need arises.

Is this restriction true?  Was this always the case, or is this relatively new?  Can anyone with an IRA confirm that it absolutely won't let you sell a note?  Is anyone grandfathered in?
Title: Re: Folio and IRAs
Post by: edward on October 13, 2013, 08:03:32 PM
I have a traditional IRA, opened in January 2013, and I buy and sell on Folio all the time. I live in a state that allows investors in both new LC and Folio notes, in case that makes a difference.
Title: Re: Folio and IRAs
Post by: yojoakak on October 14, 2013, 10:02:37 AM
LC's site says that Folio trading is not allowed in an IRA.  But that snippet didn't appear until some time last year...

Can you post the snippet please?
Title: Re: Folio and IRAs
Post by: thezinfan on October 14, 2013, 10:24:22 AM
I trade in my IRA account all the time on Folio.
Title: Re: Folio and IRAs
Post by: core on October 14, 2013, 12:09:19 PM
Can you post the snippet please?

Sure.  On the About the Trading Platform (https://www.lendingclub.com/public/mainAboutTrading.action) page, the very first thing at the top of the page in a highlighted box appears this snippet:

Please note that at this time, Lending Club Notes purchased through a tax-advantaged individual retirement account (IRA) cannot be traded on the Trading Platform and must to be held through maturity, either 36 or 60 months depending on the Notes you choose.

edward/thezinfan-  Thanks for your info.  It appears that this message is some plot at LendingClub to dissuade people from trading.  That, or you two got in before the restriction was put in place.  When did you guys activate the Folio account attached to your IRAs?
Title: Re: Folio and IRAs
Post by: thezinfan on October 14, 2013, 01:35:13 PM
I opened my IRA's in Feb 2012. Activated folio on those accounts immediately.
Title: Re: Folio and IRAs
Post by: core on October 14, 2013, 03:11:13 PM
I'm glad some of you have had luck getting in.  So there is still hope.

It sure would be unfortunate to turn 59-1/2 thinking you were going to retire comfortably cruising your brand new luxury yacht around San Francisco bay, only to find out that they're going to lock your account the second you try to withdraw anything because you didn't adhere to the posted rules.

And before anyone says I'm being overly paranoid, well which is worse:  Blatantly disregarding a very clearly worded rule, or doing something like using automated tools which isn't even expressly forbidden anywhere?  As Rev can attest to, they feel perfectly justified in blocking your IP whenever they feel like it.  I don't think it's too much of a stretch for them to point to their policy in this case and say you were in violation.

This business of making up the rules depending on the phase of the moon is getting a little old.
Title: Re: Folio and IRAs
Post by: DanB on October 14, 2013, 03:51:46 PM
I'm glad some of you have had luck getting in.  So there is still hope.

It sure would be unfortunate to turn 59-1/2 thinking you were going to retire comfortably cruising your brand new luxury yacht around San Francisco bay, only to find out that they're going to lock your account the second you try to withdraw anything because you didn't adhere to the posted rules.

And before anyone says I'm being overly paranoid, well which is worse:  Blatantly disregarding a very clearly worded rule, or doing something like using automated tools which isn't even expressly forbidden anywhere?  As Rev can attest to, they feel perfectly justified in blocking your IP whenever they feel like it.  I don't think it's too much of a stretch for them to point to their policy in this case and say you were in violation.

This business of making up the rules depending on the phase of the moon is getting a little old.


I don't think you're being overly paranoid at all.............if your comments are meant to apply only to yourself. After all you have already been flagged. I'd suspect that the rest of us might have a lot less cause for any paranoia at all.  As for Rev's experiences, I'm wondering if he would put it, exactly the way you've put it.   
Title: Re: Folio and IRAs
Post by: core on October 14, 2013, 04:21:28 PM
I'd suspect that the rest of us might have a lot less cause for any paranoia at all.

You are quite correct.  You might have a lot less cause for any paranoia.  Do you feel lucky Dan?  Feel like gambling?  (I guess that's a silly question to be asking the Dan Man!)

Quote
As for Rev's experiences, I'm wondering if he would put it, exactly the way you've put it.

Of course he wouldn't put it exactly the way I put it.  Because I have that certain way of putting things that cannot be duplicated by most. :)  He would likely agree with the spirit of what I said though.  I only know this because I've had the exact same experiences -- starting way before the flagging event.

If trading isn't allowed in an IRA, but you do it anyway, Dan I can see where you would think your account would "probably" be safe.  But this is completely a guess on your part and we are really just at the mercy of whoever happens to be in charge of the decision that day.  Guess who that is?  I'll give you a hint, her name starts with 'S'.

How do you know for a fact where they're going to draw the line in each case?
Title: Re: Folio and IRAs
Post by: cnmor54 on October 14, 2013, 04:24:00 PM
I am siding with you Core

(oh no ... i took a wrong turn in sesame street land)

banks change their rules all the time.
Title: Re: Folio and IRAs
Post by: core on October 14, 2013, 04:45:01 PM
I am siding with you Core
(oh no ... i took a wrong turn in sesame street land)

Muhahahaha... welcome to the dark side!

banks change their rules all the time.

Yes, but they do it in a straightforward manner... usually.  And they do it in writing.  If they want to start charging me a $10 ATM fee, that's fine, I'll see the charge on my statement and I'll probably change banks before I use the ATM again.  If they quietly lower the interest rate to zero, once again, no big deal as you see it eventually and can make a decision at that point.

But think about this case:  The agreement for my bank debit card has in the fine print that you are not allowed to purchase pharmaceuticals online with it.  I have done this on more than one occasion.  If they discover this 10 years down the road, what do you think is going to happen?  They lock my account for weeks and prevent me from making withdrawals?  Maybe go back and reverse all interest that I made over those 10 years?? No, worst case they cancel my debit card and cut me a check.

But no, with LC there are all these hidden gotchas that one has to worry about, and then you get to sit there and take guesses as to what's going to happen when you break some rule that you didn't even know existed. (I'm guessing most didn't know about this IRA restriction by the sounds of it.)  You're forced to think to yourself, hmm, is this one going to have no detrimental effects, or get my IP blocked, or my account locked, account permanently closed, or money withheld?  None of this is in writing where we can find it so they are free to make things up after the fact.
Title: Re: Folio and IRAs
Post by: thezfunk on October 14, 2013, 04:57:29 PM
I didn't know about this.  I opened my Roth IRA in June/July 2013 and applied for Folio only recently and was approved maybe 2-3 weeks ago?  However, I haven't done any trading on FOLIO yet, I have just been buying new notes.  Hey, Core, if you want to arrange some sort of test, I can pick a few 'sweethearts' for you to buy off of me  ;)
Title: Re: Folio and IRAs
Post by: DanB on October 14, 2013, 05:23:20 PM
I'd suspect that the rest of us might have a lot less cause for any paranoia at all.

You are quite correct.  You might have a lot less cause for any paranoia.  Do you feel lucky Dan?  Feel like gambling?  (I guess that's a silly question to be asking the Dan Man!)

Quote
As for Rev's experiences, I'm wondering if he would put it, exactly the way you've put it.

Of course he wouldn't put it exactly the way I put it.  Because I have that certain way of putting things that cannot be duplicated by most. :)  He would likely agree with the spirit of what I said though.  I only know this because I've had the exact same experiences -- starting way before the flagging event.

If trading isn't allowed in an IRA, but you do it anyway, Dan I can see where you would think your account would "probably" be safe.  But this is completely a guess on your part and we are really just at the mercy of whoever happens to be in charge of the decision that day.  Guess who that is?  I'll give you a hint, her name starts with 'S'.

How do you know for a fact where they're going to draw the line in each case?

Perhaps you are, but I assure you that I am at the "mercy" of no one from LC.
 As for the rest of your comment, no I'm not going to help a self proclaimed white collar crook rally public opinion onto his side on this particular issue. I am unmoved by your argument. 
Title: Re: Folio and IRAs
Post by: faeriering on October 15, 2013, 01:15:00 AM
I think we talked about this on the forum before with Sarah.  I could trade on my account (Roth IRA) on folioFN, but she couldn't get a IRA account opened because they said she was in a folio only state and wouldn't be able to trade.

Hope that helps
Title: Re: Folio and IRAs
Post by: Rob L on October 15, 2013, 03:57:33 AM
I live in VA so I can purchase notes direct from LC. I opened my Traditional IRA rollover account in May and soon after set up to trade notes on Folio. I've bought precisely 1 (count em) notes from Folio and sold 2. No objections were raised when I setup up my account for Folio trading, nor when I bought and sold notes on Folio. Maybe I just missed it when doing my initial study of LC, but I had no idea that I was prohibited from Folio trading (a pretty big thing to miss) until I saw this thread. Stunned actually. This is a really big deal. I haven't seen anyone post that they knew about this when they signed up and did so anyway; eyes wide open so to speak. Please speak up if you are out there. Peter; you want to weigh in on this?

Wonder if this is the law or just an LC policy. There are many things that by law you can't do in an IRA brokerage account that are fine in taxable ones. I believe buying securities on margin and selling them short are two examples. Even if you don't know the rules your IRA custodian will (I thought that was a part of their job). They won't let you make trades that break the law. That implies to me that (hopefully) this is a LC policy and not the law. If so when did this policy start and why is it there?
Title: Re: Folio and IRAs
Post by: JDowding on October 15, 2013, 12:05:45 PM

I didn't know that, but I'm not surprised.    It occurred to me that, unless they also block Folio transactions between accounts held by the same person, that you could use Folio to illegal transfer funds between IRA and non-IRA accounts, just post the note at an unreasonably high price on one account, and buy it from the other.
Title: Re: Folio and IRAs
Post by: Vlad on October 15, 2013, 12:57:38 PM
According to the cached version of LC's website on archive.org, that message appeared last month. And yet, I'm still able to make trades in my IRA account.
Title: Re: Folio and IRAs
Post by: ggnoob1337 on October 15, 2013, 01:38:47 PM
I have a Roth IRA for myself and a Roth IRA for my wife. I've been able to sell notes on Folio with both of them. I just opened my account in August and my wife's in September.
Title: Re: Folio and IRAs
Post by: pplinvestor on October 16, 2013, 01:27:20 AM
I wonder whether the rule only apply to those states that can't invest in LC directly.  Then, one can not open Folio account in an IRA account.

If LC does not allow IRA account trades in Folio, the LC shall not approve Folio application.  In contrast, they readily approved my application and allowed me to trade for many months already.  Not every investor will read all LC rules and check this forum.  In fact, a few months ago when I asked how to liquidate IRA account on this forum, the responses were giving on this forum is to sell at folio.
Title: Re: Folio and IRAs
Post by: yojoakak on October 16, 2013, 10:28:38 AM

It occurred to me that, unless they also block Folio transactions between accounts held by the same person, that you could use Folio to illegal transfer funds between IRA and non-IRA accounts, just post the note at an unreasonably high price on one account, and buy it from the other.

You left off "...and go to jail or get a fine":

http://www.lendacademy.com/forum/index.php?topic=1130.0


The main benefit I see to Foliofn trading in an IRA is you can forgot about the reams of paperwork you end up having to file along with your Tax Return.
Title: Re: Folio and IRAs
Post by: lender_john on October 16, 2013, 10:50:59 AM

This is interesting.. and definitely new..

I've had an IRA for a few years in a folio only state, so not sure what exactly I'm supposed to do now.

The language could be interpreted that it applies only to notes purchased through the normal investment process.. although not sure...

They are certainly well aware of which state I'm in.. and the fact that I actively use foiliofn and haven't seen any notice or received any communication from them regarding it.
Title: Re: Folio and IRAs
Post by: Rob L on October 16, 2013, 12:16:31 PM
The main benefit I see to Foliofn trading in an IRA is you can forgot about the reams of paperwork you end up having to file along with your Tax Return.
This was the deciding factor in my decision to use IRA funds for my LC investment.

Can't believe I missed the "No Folio" rule when first starting out, and hate it when the rules are changed in the middle of the game. I still feel like there's a very big deal brewing here. That new "You are now leaving..." pop up we all get when clicking over to Folio may be apart of all of this too.

PS: Yojoakak; don't know if you saw my post a couple of weeks ago on an old thread, but a personal thank you for the "Notes" Greasemonkey script you wrote. Very nice work and most helpful. Everybody's gotta be using it to cope with that miserable Folio user interface.
Title: Re: Folio and IRAs
Post by: Vlad on October 17, 2013, 10:44:39 AM
So has anyone heard from LC about this? It seems like no one here has has so far been prevented from continuing to make trades. Perhaps this policy applies to only new accounts, either that or LC plans to implement it in the near future.
Title: Re: Folio and IRAs
Post by: yojoakak on October 17, 2013, 11:03:28 AM

PS: Yojoakak; don't know if you saw my post a couple of weeks ago on an old thread, but a personal thank you for the "Notes" Greasemonkey script you wrote. Very nice work and most helpful. Everybody's gotta be using it to cope with that miserable Folio user interface.

Thanks! I appreciate that. I don't know how many people use it, but I would not be surprised if that number was in the single digits.

(I added an "Never ask again" option for the "You are now leaving..." pop up. I've never been quite sure if Greasemonkey/Tampermonkey automatically fetches updates, though so you may need to do the update manually.)
Title: Re: Folio and IRAs
Post by: core on October 18, 2013, 09:01:57 PM
This is a really big deal.

I suppose that depends on one's definition of a "really big deal".  The odds of them locking accounts and withholding funds because of this are admittedly quite low. 

Worst case, your entire account would have to be treated as an early distribution and you get to pay taxes and a 10% penalty.  So if you're in the top federal bracket you'd lose 45% of your account value.  Hey, it could be worse.
Title: Re: Folio and IRAs
Post by: Rob L on October 19, 2013, 12:08:46 AM
Yes, you've certainly caught the essence of my "big deal" theme. I have one account and it's a traditional IRA. Just because LC isn't stopping me doesn't make it a very smart thing to use Folio. Until I get a definitive legal read on it I'll steer completely clear. If I want to cash out I'll just have to let the notes slowly run off. Glad I only have 36mo loans in my portfolios.

I've been warned. I very much appreciate your post that brought this to my attention; don't know if I would have ever noticed otherwise.

The whole LC securities structure is brand new, and it took its own major whoops and restart to get the good investment keeping seal of approval from the SEC. A part of that process must have included an opinion letter from the IRS giving the okay for qualified IRA funds to be invested in LC. Maybe that opinion letter didn't consider Folio; we have been recently and are continually warned Folio is not LC. So, some bright lawyer at LC realizes, hey we don't really know the IRS position on Folio trading of notes in an IRA account. The IRS has not issued an opinion on it. So, LC thinks it might be smart to at least warn its customers they may be running afoul of the IRS here. The "at this time" part of the warning make think that maybe nobody knows.
Title: Re: Folio and IRAs
Post by: yojoakak on October 19, 2013, 10:44:06 AM
Worst case, your entire account would have to be treated as an early distribution and you get to pay taxes and a 10% penalty.  So if you're in the top federal bracket you'd lose 45% of your account value.  Hey, it could be worse.

Don't forget you would have 60 days to deposit it into another IRA ("rollover"). But I guess if you were in a coma during that time...
Title: Re: Folio and IRAs
Post by: howler99 on October 19, 2013, 10:48:17 AM
What's to keep someone with a regular account and an IRA from listing notes from the regular high account at a ridiculous markup, and then buying then notes from the IRA account...and I assume getting a penalty free distribution from the IRA? Maybe this has something to do with it?
Title: Re: Re: Folio and IRAs
Post by: thezfunk on October 19, 2013, 11:06:44 AM
What's to keep someone with a regular account and an IRA from listing notes from the regular high account at a ridiculous markup, and then buying then notes from the IRA account...and I assume getting a penalty free distribution from the IRA? Maybe this has something to do with it?

That's funny.  You are not the first person here to think of that.  Although the last time it was brought up, the suggestion was in reverse; a way to beat the IRA deposit limit.  Either way,  pretty sure that would get you in trouble.

Sent from my SCH-I535 using Tapatalk 4
Title: Re: Folio and IRAs
Post by: GS on October 19, 2013, 11:38:40 AM
I'm sure LC could handle "self dealing" in the way that most IRAs handle the SEC rules on "Free rides" ... Buying and selling stocks with unsettled funds within a 3 day window.  First time I did that (without knowing) I got a call and they told me I first get a warning, next time they freeze my account for a week, and the account freezes continue to increases, until the eventually ban me. 

LC should be able to detect outlier buy/sells with the same party name or SS number, and cancel or undo the trades with a warning ... Then start freezing and/or banning the people who repeatedly attempt such trades. I think it is legal to buy/sell your own notes between accounts as long as you are doing it at or near par or a normal markup.

Banning IRAs from folio would be a heavy handed way to deal with a small problem, that may not even exist.  A software detection method could work.  Or just make the user agreement "sign" that they will not "self deal" and authorize LC to report to the IRS/SEC if they detect self dealing trades.
Title: Re: Folio and IRAs
Post by: core on October 19, 2013, 02:56:32 PM
Don't forget you would have 60 days to deposit it into another IRA ("rollover"). But I guess if you were in a coma during that time...

During what time, is the question.  If the clock starts the moment you make the offending trade then it's already too late for almost everyone here.  Waiting for a year-end statement or letter from LC counsel (or IRS) will also almost definitely be beyond any 60 day window you might have had.

Title: Re: Folio and IRAs
Post by: yojoakak on October 19, 2013, 03:14:23 PM
Don't forget you would have 60 days to deposit it into another IRA ("rollover"). But I guess if you were in a coma during that time...

During what time, is the question.  If the clock starts the moment you make the offending trade then it's already too late for almost everyone here.  Waiting for a year-end statement or letter from LC counsel (or IRS) will also almost definitely be beyond any 60 day window you might have had.

I'm not an accountant, but: If you don't have the money, then how is it a withdrawal/distribution?
Title: Re: Folio and IRAs
Post by: core on October 19, 2013, 03:23:25 PM
I'm not an accountant, but: If you don't have the money, then how is it a withdrawal/distribution?

It's a distribution the moment you take the money from an IRA and move it into an account which does not qualify.  In this case it would be the account status itself that changes -- the cash does not have to move.  The fact that you personally never received any cash is never relevant; There are all kinds of similar things one can get oneself into with say self-directed real estate IRAs where you're instantly in trouble even though you never moved any cash.  For example take that income-producing property of yours and just start using it as a family lake house.  Maybe that was a bad example... I'm sure someone can think of a better one.  Similar pitfalls are all over the place which don't involve an actual withdrawal.
Title: Re: Folio and IRAs
Post by: Joleran on October 19, 2013, 04:36:12 PM
What's to keep someone with a regular account and an IRA from listing notes from the regular high account at a ridiculous markup, and then buying then notes from the IRA account...and I assume getting a penalty free distribution from the IRA? Maybe this has something to do with it?

The main issue would be that the loans you sold at a ridiculous markup would come with taxes on the "profit".
Title: Re: Folio and IRAs
Post by: pplinvestor on October 19, 2013, 10:30:22 PM
Banning IRAs from folio
But LC did not ban by rejecting Folio application from IRA account, nor disallowing trading on Folio from IRA.  LC can easily do.  They just "ban" in rules published online?  That's not much "ban" to me.
Title: Re: Folio and IRAs
Post by: Rob L on October 20, 2013, 04:45:28 AM
It's a distribution the moment you take the money from an IRA and move it into an account which does not qualify.
Okay, here's how complicated things can be. I have most of my IRA funds at Fidelity Investments. When I started with LC I filled out the SDIRA paperwork, they opened a Rollover Traditional IRA account and directed Fidelity to transfer funds to it per my instructions to SDIRA. Once that amount was fully invested I wanted to add a little more. My Fidelity Account has the ability to transfer funds by wire to another institution. Prior to the transfer I had to get Fidelity to set up my SDIRA routing and account numbers, verify identity, etc. Finally everything is ready to go, I log onto Fidelity, select the from account (my IRA) and the to account (SDIRA). Before I hit enter Fidelity warned me that this was a distribution! Obviously I did not hit enter. I called Fidelity and they told what I had to do. Even though it was IRA to IRA I wasn't going about it properly. What I must do, and have successfully done, is fill out a SDIRA IRA rollover  transfer request form and email it to them along with a letter of instruction. They make the request to Fidelity to move the funds, not me. I was very careful all along the way because I don't want any distributions, just rollovers, and I almost messed up big time. Fidelity would not have stopped me from making the transfer and I would have been in for a surprise come tax time. At best it would have been something to explain and not a big deal but I don't want to go there. The IRS is very picky about this stuff and I didn't know isn't an acceptable answer.

I have put in an email to my account rep on this topic. If I get some answers I'll try to share what I learn.

To core: stream of consciousness typing in the middle of the night will do that.
Title: Re: Folio and IRAs
Post by: core on October 20, 2013, 04:54:13 AM
Whoa, Rob.  The IRS scared you right out of using paragraphs and as a consequence, I'm scared out of my mind.   Thanks for the heads-up!
Title: Re: Folio and IRAs
Post by: yojoakak on October 20, 2013, 12:07:58 PM
It's a distribution the moment you take the money from an IRA and move it into an account which does not qualify. 
Again I am not an accountant, but isn't it either a distribution OR the first half of a rollover? How can you tell the difference?

Quote
In this case it would be the account status itself that changes -- the cash does not have to move.

Can LC just unilaterally do that? I thought while an individual might be the beneficiary of an IRA, that individual doesn't really own it.
Title: Re: Folio and IRAs
Post by: Rob L on October 22, 2013, 02:21:14 AM
I have not heard back from my account rep. That is quite unusual. Typical response is less than a day.

To clarify what may be the problem I copied a note sale from my June FolioFn statement. There was nothing wrong with the note; just a duplicate I bought by mistake and wanted to sell.

As you see, the first thing that happens is that the note is transferred from my LC account into my FolioFn account. The final step is the transfer of funds into my LC account from my FolioFn account. My fear is that the movement of funds and notes between these two accounts may not be considered "rollovers", thus reportable to the IRS for tax purposes and the reason I've been saying this could be a huge deal! I do very much hope this isn't the case at all.

Date : 6/24/13   
Transaction ID :   
Type : Sell

Note Transfer                    Transfer Note from Lending Club account to FOLIOfn account    
Trade                                  Sell Note: 24959816                                                        $50.49
Cash Transfer                   Transfer Funds to Lending Club account                   -$49.99
Fees                                    Trading Fees                                                                    -$0.50
Title: Re: Folio and IRAs
Post by: Rob L on October 22, 2013, 02:48:22 AM
Can LC just unilaterally do that? I thought while an individual might be the beneficiary of an IRA, that individual doesn't really own it.

Individuals certainly do own their IRA account in their own names. These are special accounts with special rules governed by the tax code and they have a custodian that provides the IRS reporting, etc. The custodian is the bank, brokerage, etc. that provides the account.

For the purpose of selecting who gets the assets when the owner dies he/she may name a beneficiary, multiple beneficiaries (divide it up), secondary beneficiaries (in case primary beneficiaries predecease primary ones, etc.

You may be thinking of trusts, which are separate legal entities, not owned per se, but are administered by trustees. Trusts, patricularly living or inter vivos  trusts are very useful estate planning devices. Don't leave earth without one.
Title: Re: Folio and IRAs
Post by: yojoakak on October 22, 2013, 10:11:21 AM
You may be thinking of trusts, which are separate legal entities, not owned per se, but are administered by trustees. Trusts, patricularly living or inter vivos  trusts are very useful estate planning devices. Don't leave earth without one.

I thought an IRA was a trust...

"26 USC § 408 - Individual retirement accounts

For purposes of this section, the term “individual retirement account” means a trust created or organized in the United States for the exclusive benefit of an individual or his beneficiaries, but only if the written governing instrument creating the trust meets the following requirements..."

http://www.law.cornell.edu/uscode/text/26/408
Title: Re: Folio and IRAs
Post by: Rob L on October 22, 2013, 10:55:09 AM
I thought an IRA was a trust...
"26 USC § 408 - Individual retirement accounts
http://www.law.cornell.edu/uscode/text/26/408

You are absolutely right; I stand corrected. Learn something new every day.
See IRS Publication 590 for a little light reading.

Leaves me even more clueless as to what's going to become of this LC / FolioFn IRA situation.
Title: Re: Folio and IRAs
Post by: core on October 22, 2013, 07:36:53 PM
I have not heard back from my account rep. That is quite unusual. Typical response is less than a day.

Two full business days and still no response Rob?  Strange.  Did you not send your account rep enough roses this year?  They may be in panic mode over there.  Staying quiet hoping that things will blow over.  They're probably right about that.  The best course of action may be to continue trading as usual and when things blow up we can just blame it on the custodian.  $$$

I thought an IRA was a trust...
"26 USC § 408 - Individual retirement accounts

Very interesting.  Yes, one does learn something new every day.  And I thought the 'A' in IRA always stood for "arrangement".  When did that change?
Title: Re: Folio and IRAs
Post by: Rob L on October 22, 2013, 08:57:05 PM
Three business days now.
If the answers to my questions were quick and easy I probably would have heard something by now. Possibly a "sticky wicket" as the Brits might say.
I wouldn't be surprised if this doesn't take a bit of time.
Title: Re: Folio and IRAs
Post by: Rob L on October 24, 2013, 03:33:15 PM
The answer from my LC Account Rep to my email is in. All posted without commentary. First my email:

Hi, There is some new language on your web site that I very much doubt was there when I joined this past May. It's a really big deal and I simply do not believe I overlooked it when I opened my account (though admittedly anything is possible). From the LC web site 10/19/2013:
Quote
About the Trading Platform

Please note that at this time, Lending Club Notes purchased through a tax-advantaged individual retirement account (IRA) cannot be traded on the Trading Platform and must to be held through maturity, either 36 or 60 months depending on the Notes you choose.

As you know, my account is a Traditional IRA. What can you tell me about the history of this ban; when it started, why it was implemented, what activity is ongoing or planned regarding the ban, if or when the ban may be lifted or modified in the future, and whether or not the ban applies to accounts that were opened before it was announced (namely mine)? Finally, as my IRA custodian, what part does SDIRA play in this matter? Thanks, Rob

And the reply:
Quote
Hi Rob,

Thanks for your email.  Sorry about the delay in getting back with you.  Generally, investors selecting to open their accounts through an IRA do not intend to actively trade Notes from their accounts; they intend to hold the investment as a fixed income product for the maturity of the Note.  Foliofn, the alternative trading system through which the secondary market is operated, is a separate entity from Lending Club and is a registered broker-dealer with its own legal processes and investor requirements.  Foliofn does not currently permit IRA accounts through SD-IRA to trade on the platform.  For the vast majority of investors holding an IRA account, this is not a problem as they intend to hold the investment.  We are working with Foliofn to create a solution for the few IRA accounts that would like access to the secondary market, but we do not currently have an estimated time frame for that solution.

To make this more clear, Lending Club recently made the update to the website to prominently notify investors that at this time Notes purchased through a tax deferred individual retirement account cannot be traded on the secondary market.  I  will keep you apprised of any developments to permit trading on the secondary market.
Thank you.
Regards,

To which I responded with two emails:
Hi,
Thank you very much for your reply. I'm surprised it came as quickly as it did. Tough subject I'm sure. My reading of it is that LC and its IRA customers have a very big problem here, but hey what do I know? Hopefully, this will be quickly resolved with no impact to your customers that unknowingly are not clear on that no IRA /  FolioFn rule.

I would like to post the text of your response in full on the Lending Academy blog, with your name removed. There seems to be considerable interest so this will help spread the word so to speak, and possibly raise awareness of these facts. Please let me know if you have any objections. I know from your Disclaimer that I am prohibited from doing so without your permission.
---and---
Hi,
One more thing; just this morning 10/24/2013 10:00 am I checked your FAQ web page regarding FolioFn (see attached screen shot):
https://www.lendingclub.com/foliofn/faq.action#ga3
Still says:
Quote
3. Who can participate?

Anyone can participate. You must first sign up as an investor with Lending Club (there is no obligation to lend money), then sign up as a trading member with FOLIOfn. Both memberships are free of charge. At this moment, applicants from District of Columbia, Kansas, Maryland, Ohio, Oregon, and Vermont are not eligible to become trading members with FOLIOfn.

Maybe this should be a little "more clear" as well. Note that this FAQ answer is part of the LC website, not FolioFn's. Sincerely, Rob

The reply:
Quote
Hi,

Thanks for your feedback. I will let our Marketing team know about the FAQ. We are in the process of a big update to our knowledge base. It looks like this section has not been updated yet.

In regards to posting the response in my last email, you can do so if you wish. Thank you for asking.

Regards,
(https://forum.lendacademy.com/proxy.php?request=http%3A%2F%2Fwww.pixpreserved.com%2Fimages%2FWho%2520Can%2520Use%2520FolioFn%2520FAQ%2520Screenshot%2520from%25202013-10-24%252010-39-01.png&hash=48b61e6f1a096fd6fa605209cc022860)

Sorry this was such a long post. Hopefully some will find it useful.
Title: Re: Folio and IRAs
Post by: core on October 24, 2013, 03:47:11 PM
Quote
To make this more clear, Lending Club recently made the update to the website to prominently notify investors that at this time Notes purchased through a tax deferred individual retirement account cannot be traded on the secondary market.  I  will keep you apprised of any developments to permit trading on the secondary market.

This has already been shown to be false by all the IRA holders here that say they still trade.  All he seemed to say is the same thing that's on the site, plus a little color.  What does "cannot" mean, when you obviously "can"? 

He said nothing of consequences.  Absolutely no info.  I think I'm more confused now than I was before.   Seems like a dodge to me.
Title: Re: Folio and IRAs
Post by: thezfunk on October 24, 2013, 03:56:19 PM
Quote
To make this more clear, Lending Club recently made the update to the website to prominently notify investors that at this time Notes purchased through a tax deferred individual retirement account cannot be traded on the secondary market.  I  will keep you apprised of any developments to permit trading on the secondary market.

This has already been shown to be false by all the IRA holders here that say they still trade.  All he seemed to say is the same thing that's on the site, plus a little color.  What does "cannot" mean, when you obviously "can"?  He said nothing of consequences.  I think I'm more confused now than I was before.

I think the problem is they don't know how to handle folio trading via IRA in respect to tax reporting.  Or they don't know how to explain it to the IRS so the IRS doesn't either come after them or you.  Does folio report your stuff to the IRS...does Lending Club?  I don't have any idea since this is my first year with Lending Club and first year with an P2P IRA.  I have been doing Prosper taxes the last couple of years but no secondary market trading until this year.  I would imagine this is something that would need some sort of blessing from the IRS for IRAs?
Title: Re: Folio and IRAs
Post by: core on October 24, 2013, 04:19:31 PM
Sure there's plenty of possible reasons/problems.

All I want to know is:  Can you or can't you?  What if I claim I never saw that page?  What about those who legitimately haven't yet? They just blissfully keep trading?  I know what I'm going to do.  My memory is about to become rather poor.
Title: Re: Folio and IRAs
Post by: thezfunk on October 24, 2013, 04:21:58 PM
Sure there's plenty of possible reasons/problems.

All I want to know is:  Can you or can't you?  What if I claim I never saw that page?  What about those who legitimately haven't yet? They just blissfully keep trading?  I know what I'm going to do.  My memory is about to become rather poor.

Don't forget those terrible reading comprehension skills!
Title: Re: Folio and IRAs
Post by: Vlad on October 25, 2013, 09:39:08 AM
If LC does indeed take away my ability to trade in IRA, I will close my account. Since we can't write off losses like we can in a taxable account, it's critical to have the ability to sell loans that may default. I thus do less selling in my non-IRA account, plus I hate dealing with tax paperwork.

What worries me is that we can't get a clear answer from LC on this. The rep whom I called at LC told me he thinks the new policy may only apply to new accounts, but he wasn't confident in his answer.
Title: Re: Folio and IRAs
Post by: core on October 25, 2013, 10:25:58 AM
What worries me is that we can't get a clear answer from LC on this. The rep whom I called at LC told me he thinks the new policy may only apply to new accounts, but he wasn't confident in his answer.

Hmmm at first read I thought maybe that would make sense, just having it apply to new accounts.  But wait a second:  If there is a legal reason why IRA accounts cannot currently trade, then what difference would it make when you opened the account?  FolioFN has no mechanism to allow this, but if you did it before, hey that's ok, just keep doing it forever?  *scratching head*
Title: Re: Folio and IRAs
Post by: GS on October 25, 2013, 12:21:07 PM
I really don't understand why this is an IRA/IRS problem.  Folio says it holds no cash or notes, and seems to just act as a 3rd party that matches buyers with seller, for a commission.  I don't know why they'd be involved in reporting my income to the IRS when they are not actually handling the cash.  The IRS report should be handled by LC, and if ever called into question, it should be easy to match up the folio buy/sell record with the LC account activity report.
Title: Re: Folio and IRAs
Post by: core on October 25, 2013, 12:31:51 PM
I really don't understand why this is an IRA/IRS problem.  Folio says it holds no cash or notes, and seems to just act as a 3rd party that matches buyers with seller, for a commission.  I don't know why they'd be involved in reporting my income to the IRS when they are not actually handling the cash.

Folio may not "hold" any cash, but as you can see from the statements, they go out of their way to make it clear that cash and notes are being transferred between the two accounts.  Almost to a silly level of detail about such transfers... as if trying to make a point or CYA.  As for IRS reporting, Folio has (?) to be the one that sends out the 1099-B's for any sales you make.  I don't think LC could do this since they aren't the broker-dealer.
Title: Re: Folio and IRAs
Post by: Rob L on October 25, 2013, 12:35:55 PM
What worries me is that we can't get a clear answer from LC on this. The rep whom I called at LC told me he thinks the new policy may only apply to new accounts, but he wasn't confident in his answer.
I have a guess with absolutely nothing to back it up. This has nothing with new or old accounts. All current FolioFn accounts are not IRA's (a guess). Money and notes are moved back and forth between our LC IRA account(s) and our FolioFn account(s) every trade. Look at your FolioFn statements to verify that fact. They do not qualify as IRA "custodian to custodian transfers" and are therefore taxable events, and possibly worse. Hope I'm dead wrong; I really do! Please, someone out there who knows (not guesses) post it!

And how many years has LC been in business only to now figure out that LC IRA to/from FolioFn accounts have taxable consequences?
How far back will the IRS go and what will they do about it? How many LC former and current customers are exposed?
I'm new here, but haven't heard any IRA account holders mention receiving end of year IRS forms regarding FolioFn transactions? If you are out there fill me in.

The fix then will possibly be a "new FolioFn account" which you open as an IRA. Then money or notes may be transferred between LC and FolioFn "custodian to custodian". No taxable consequences that I know. Don't I know how SDIRA fits into this picture since they after all are the IRA custodian for my LC account.

I'm not pretending to really understand this stuff. IRA rules, tax law, ... makes my head hurt.
Title: Re: Folio and IRAs
Post by: core on October 25, 2013, 12:56:02 PM
Does folio report your stuff to the IRS...does Lending Club?  I don't have any idea since this is my first year with Lending Club and first year with an P2P IRA.

For taxable accounts they both do.  The 1099-OID comes from LendingClub.  You get a 1099-B from FOLIOfn Investments, Inc. for any notes you sold on Folio.  I suppose you might also get a 1099-B from LC if you had chargeoffs and a 1099-MISC for bonuses/etc but I haven't had either of those so I don't know.  For IRAs though I have no clue who does what.  I think we would have heard screaming last Feb already if people were getting 1099-B's for their Folio IRA trades last year.

It is apparent that LC isn't going to give us an answer soon enough.  Certain decisions have to be made by year end for many folks here I'm sure.  The only solution is for someone who traded in their IRA last year to call up the IRS and ask to be audited.  I think they would be happy to do so.  :)
Title: Re: Folio and IRAs
Post by: Verto on October 26, 2013, 04:01:48 AM
It is apparent that LC isn't going to give us an answer soon enough.  Certain decisions have to be made by year end for many folks here I'm sure.  The only solution is for someone who traded in their IRA last year to call up the IRS and ask to be audited.  I think they would be happy to do so.  :)

A private letter ruling for someone with a large account size or large amount of trades would be the best approach. I don't see the IRS commenting officially on anything anytime soon.
Title: Re: Folio and IRAs
Post by: Rob L on October 26, 2013, 11:00:36 AM
The saga continues... I was looking at https://www.lendingclub.com/foliofn/howTradingWorks.action and found the following:
Quote
About the Platform
The Note Trading Platform is operated by FOLIOfn, a registered broker dealer member of FINRA/SIPC, based in Vienna, VA. More information about FOLIOfn is available at www.foliofn.com.

Naturally I visit www.foliofn.com and attempt to log into my account. No luck. I then tried "Lost my user name", entered name and full SSN. Once again no joy. Response indicated I was unknown.

This morning I called FolioFn and explained that I had applied to join the FolioFn trading platform through Lending Club in mid-May this year and received email notification of approval the next day. I asked for my account number, account type (they do offer retirement accounts of all kinds), and my login credentials. I was told they could not find any account associated with my SSN, nor one associated with my name and residence, nor my email address. I explained that for each LC note purchase or sale my FolioFn monthly statement quite clearly showed funds and notes being transferred to / from my FolioFn account, so I must have an account with them. I was told they would contact Lending Club on Monday (this is Saturday) and email me a response. If I hear something I'll pass it along.
Title: Re: Folio and IRAs
Post by: Zach on October 26, 2013, 11:05:22 AM
The saga continues... I was looking at https://www.lendingclub.com/foliofn/howTradingWorks.action and found the following:
Quote
About the Platform
The Note Trading Platform is operated by FOLIOfn, a registered broker dealer member of FINRA/SIPC, based in Vienna, VA. More information about FOLIOfn is available at www.foliofn.com.

Naturally I visit www.foliofn.com and attempt to log into my account. No luck. I then tried "Lost my user name", entered name and full SSN. Once again no joy. Response indicated I was unknown.

This morning I called FolioFn and explained that I had applied to join the FolioFn trading platform through Lending Club in mid-May this year and received email notification of approval the next day. I asked for my account number, account type (they do offer retirement accounts of all kinds), and my login credentials. I was told they could not find any account associated with my SSN, nor one associated with my name and residence, nor my email address. I explained that for each LC note purchase or sale my FolioFn monthly statement quite clearly showed funds and notes being transferred to / from my FolioFn account, so I must have an account with them. I was told they would contact Lending Club on Monday (this is Saturday) and email me a response. If I hear something I'll pass it along.

LC accounts are handled separately from their brokerage offerings. Just because you have an LC trading account doesn't mean you have a Folio Investing brokerage account. Why did you contact them anyway?
Title: Re: Folio and IRAs
Post by: core on October 26, 2013, 11:35:14 AM
Naturally I visit www.foliofn.com and attempt to log into my account. No luck.

This part, at least, is not surprising. If you trade notes on Prosper you have to go through the full FOLIOfn signup and get an actual account, but LC doesn't do it that way.  So you don't have anything to log in with.  I thought nothing of it at the time, back when I started with LC.

This morning I called FolioFn and explained that I had applied to join the FolioFn trading platform through Lending Club in mid-May this year and received email notification of approval the next day. I asked for my account number, account type (they do offer retirement accounts of all kinds), and my login credentials. I was told they could not find any account associated with my SSN, nor one associated with my name and residence, nor my email address.

Whoa, I'm starting to get that little feeling I get when something funny is going on. 

We already know, or I should say I already know based on my previous telephone calls, that Folio is not actually involved in any of this on a hands-on level.  Folio does not operate the site (contrary to the warning message LC displays), and all the trade settlement is handled by LendingClub.  Not Folio. Both 1099's are identical, except for the corporation name, down to the pixel.  That's all fine so far. 

But now from this new information, it seems there isn't even a dummy account over there to make it quasi-legit?  I can only assume that LC at least has permission to use Folio's name on the site? :)  It wouldn't be too cool if LC saw what Prosper had done with FOLIOfn and just started copying logos and legalese and stuff, now would it?  Sending a 1099-B on behalf of a company they don't even have relations with would be somewhat troublesome.

Before you call me absolutely nuts, let's look for some evidence.
On the page https://www.lendingclub.com/foliofn/tradeDisclosurePage.action (login required to view), among other things is this snippet:

All starting bid prices for the Notes are determined solely by the seller of a Note. The trading platform displays the Notes a seller has offered or desires to sell, and the starting price at which the proposed transaction would occur as determined by the seller. Trading members may bid higher than the starting price to purchase the Note, but may not bid a price higher than the total of the payments remaining on the corresponding loan.

Sound familiar to anyone?  All of this auction/bidding stuff is Prosper-esque.  LendingClub never had any such auction arrangement.  What's LC doing with a copy/paste job of Prosper legalese on their site, I wonder?

Yes I say all this half joking.  But you can't say "warning: going to Folio" and then at the same time say Folio has nothing to do with it.
Title: Re: Folio and IRAs
Post by: Rob L on October 26, 2013, 11:41:30 AM
Hi "Zach" -- I will continue to attempt to get it right  :)

I contacted FolioFn because the link says "for more information..." and I wanted more information. Specifically, I wanted to know if my account with them is a Traditional IRA, like my LC account, or something else. If you read back through my long winded earlier posts you will see why I think this an important piece of information. It seemed clear to me that I must have a FolioFn account since my FolioFn monthly statement makes reference to it twice for every note purchase or sale. I did not see any reference to "LC trading account" on the FolioFn web site(maybe I missed it). The FolioFn rep didn't say aha, let me find your "LC trading account". Nothing ...

Since the rep at FolioFn indicated no account could be found,  I'm naturally confused. Can you shed some light on how this process works? My focus is on the tax consequences of moving money and notes to/from my LC traditional IRA account and this "non-account account" by using FolioFn trading.



Title: Re: Folio and IRAs
Post by: Zach on October 26, 2013, 11:57:03 AM
Hi "Zach" -- I will continue to attempt ot get it right get it right  :)

I contacted FolioFn because the link says "for more information..." and I wanted more information. Specifically, I wanted to know if my account with them is a conventional IRA, like my LC account, or something else. If you read back through my long winded earlier posts you will see why I think this an important piece of information. It seemed clear to me that I must have a FolioFn account since my FolioFn monthly statement makes reference to it twice for every note purchase or sale. I did not see any reference to "LC trading account" on the FolioFn web site(maybe I missed it). The FolioFn rep didn't say aha, let me find your "LC trading account". Nothing ...

Since the rep at FolioFn indicated no account could be found,  I'm naturally confused. Can you shed some light on how this process works? My focus is on the tax consequences of moving money and notes to/from my LC traditional IRA account and this "non-account account" by using FolioFn trading.

Rob, I appreciate you trying to get my name right :)

With regards to your question(s), when I used to use the LC trading platform more aggressively I tried to contact Folio Investing several times with questions, but they have very little involvement in the LC platform other than acting as a 3rd-party broker for LC notes/securities. Basically, all trading platform applications have to be approved by Folio and they settle all note exchanges (buys/sells of notes), but Folio doesn't accept the responsibility/cost of providing customer service to LC customers.

There is one individual I know of at FolioFN that handles (used to handle) all LC related matters, I will PM you his name.

I hope my limited knowledge on this topic is somewhat helpful.
Title: Re: Folio and IRAs
Post by: Cries on October 29, 2013, 02:49:17 PM
Opened my IRA about 4 months ago, have been buying/selling actively on Folio, including flipping distressed notes.

Should I expect the feds to come knocking?
Title: Re: Folio and IRAs
Post by: Rob L on October 29, 2013, 04:05:09 PM
I don't know what to expect. I stopped using Folio cold turkey when I became aware of the issue the day this thread started.
Title: Re: Folio and IRAs
Post by: GS on October 29, 2013, 06:37:08 PM
An explanation would sure be nice.  At this point, I'm starting to suspect that LC knows something bad has happened, that might become a tax nightmare for IRA holders, but doesn't want to admit any wrong doing. 
Title: Re: Folio and IRAs
Post by: Rob L on October 29, 2013, 06:55:26 PM
Complete and totally unsubstantiated speculation on my part but ... If LC stepped in today and stopped IRA accounts from trading notes on Folio, would it set some legal precedent or admission of fault that they should have never permitted it in the first place? Is that why they still let it happen (i.e. it was always the responsibility of the account holder, not LC, and it still is)?
Title: Re: Folio and IRAs
Post by: core on October 29, 2013, 07:13:14 PM
At this point, I'm starting to suspect that LC knows something bad has happened, that might become a tax nightmare for IRA holders, but doesn't want to admit any wrong doing.

How's this for the ultimate nightmare:

Let's say Rob's guess is correct and each time a trade causes money to move to Folio it's a taxable event (plus penalty). You're an active trader, flipping notes, and keep recycling the same capital over and over to flip these notes and make a small profit on your modest account.  Maybe your account is only $20k but you did $300k in trading that year.  You could end up owing several times more in taxes than your entire account is worth... totally wiping it out.   Hell, you could end up owing more in taxes than your entire net worth.  Not only do you not have a retirement account left, but you're bankrupt.  Oops, but income taxes aren't bankruptable.  You're worse than bankrupt.  Out here in the country we call that screwed with zeros at the end.

I won't even get into how much worse it would be if the funds/notes returning to LC from Folio after a settle would be counted as an excess contribution.  Double your fun.

Title: Re: Folio and IRAs
Post by: bobeubanks on October 29, 2013, 11:26:34 PM
I have no P2P IRA, my interest here is academic. I wonder a few things. Does Prosper allow IRA/Folio trading? I don't find anything on the Prosper website saying either way. Is there any potential liability (to either investors to the the gov't) on LC and P for allowing improper trades?
Title: Re: Folio and IRAs
Post by: DanB on October 29, 2013, 11:46:47 PM
At this point, I'm starting to suspect that LC knows something bad has happened, that might become a tax nightmare for IRA holders, but doesn't want to admit any wrong doing.

How's this for the ultimate nightmare:

Let's say Rob's guess is correct and each time a trade causes money to move to Folio it's a taxable event (plus penalty). You're an active trader, flipping notes, and keep recycling the same capital over and over to flip these notes and make a small profit on your modest account.  Maybe your account is only $20k but you did $300k in trading that year.  You could end up owing several times more in taxes than your entire account is worth... totally wiping it out.   Hell, you could end up owing more in taxes than your entire net worth.  Not only do you not have a retirement account left, but you're bankrupt.  Oops, but income taxes aren't bankruptable.  You're worse than bankrupt.  Out here in the country we call that screwed with zeros at the end.

I won't even get into how much worse it would be if the funds/notes returning to LC from Folio after a settle would be counted as an excess contribution.  Double your fun.



Hmm. What we need is to find an investigative journalist to get to the bottom of this. Any suggestions Core?  :)
Title: Re: Folio and IRAs
Post by: core on October 30, 2013, 12:32:15 AM
Hmm. What we need is to find an investigative journalist to get to the bottom of this. Any suggestions Core?  :)

Nope.  Unfortunately we seem to be fresh out of those.  But perhaps LC has already prepared a neat and shiny packet for someone to "investigate"?

I think GS is getting close to the truth:

At this point, I'm starting to suspect that LC knows something bad has happened, that might become a tax nightmare for IRA holders, but doesn't want to admit any wrong doing. 

In other words there is a massive coverup going on!  I won't even use that other C-word.  Our best bet might be to get a double agent in one of the weekly account rep meetings.  They know we're onto them now so they're probably talking strategy.  Last week Rob's and Vlad's account reps both tried to dodge the question but they invented different stories!  They will not make that mistake again, now that they have been outed here.  We need to use LinkedIn to target some female employees that we can win over and convert to double naughts.  I've got the charm for it but I live too far away for the hands-on work.
Title: Re: Folio and IRAs
Post by: DanB on October 30, 2013, 03:23:00 AM
Core......... So you think there's another coverup/conspiracy going on. Just out of curiosity, would this one be like the 6th or is it the 7th conspiracy or cover up that you've suspected, suggested or insinuated LC to be somehow involved in within just the last year? Because I've lost count since I was too busy keeping track of the ones you think I am party to in league with them. :)

No offense to the "Main Office"  :), but does anyone (other than Core) really think those guys are bright enough to be pulling off all these cover ups & conspiracies simultaneously. I mean please!

Would somebody please get to the bottom of this before Core names this whole thing LCGate!
I'd volunteer to find out, being so close to SF & all, but that'll just make Core spin another conspiracy.
Title: Re: Folio and IRAs
Post by: cnmor54 on October 30, 2013, 10:32:48 AM
Quote
target some female employees that we can win over and convert to double naughts.  I've got the charm for it

ROFLMAO!!!

Peter, you have one of the most entertaining blogs on this planet.
Title: Re: Folio and IRAs
Post by: core on October 30, 2013, 02:08:49 PM
Core......... So you think there's another coverup/conspiracy going on.

Conspiracy, no.  Cover-up, yes maybe.  I'd sure call it a cover-up if after a company does something that could potentially cause big problems for others, they subsequently try to keep it quiet and/or has its account reps make up stories while they scramble to figure out a solution and damage control.  One definition of a cover-up is an attempt, whether successful or not, to conceal evidence of wrongdoing, error, incompetence or other embarrassing information.

I'd say this meets that definition.  The original event need not be intentional.  And it does not matter what their good intentions might be at a later date to fix the problem.  Do you have another word for this?  Not a Portuguese one, please.

Just out of curiosity, would this one be like the 6th or is it the 7th conspiracy or cover up that you've suspected, suggested or insinuated LC to be somehow involved in within just the last year? Because I've lost count since I was too busy keeping track of the ones you think I am party to in league with them. :)

If this is the 6th or 7th one then it would still have no relevance to anything but my own credibility.  And my credibility in turn has nothing to do with this incident.  All one has to do is read LC's own site, and then read the narratives of employee contact posted by others to see what is going on.  My posts have nothing to do with it.

Would somebody please get to the bottom of this before Core names this whole thing LCGate!
I'd volunteer to find out, being so close to SF & all, but that'll just make Core spin another conspiracy.

Dan, if you can come up with a plan, but all means do so, with all haste!  If you would like to volunteer I give my word that I will not accuse you of conspiring with LC on this particular matter.  I am eager to hear what your plan is though.  I hope you are not one of those people who thinks an in-person visit and a handshake means that you are somehow magically going to get a different truth (or lie) than an email or phone call would.  You are going to need to be more creative than that.  I know you have it in you.

For example, if would be rather unsatisfying if you walked in there and had a 10 minute chat with someone at LC and then came back here to post something like this:

"I have spoken with John Smith, the Chief Cover-up Guy at LendingClub.  He assures me that there are some exciting developments on this which I hope to be able to share with you in the coming weeks.  Stay tuned for details."

The details never come.  The cover-up continues until everyone loses interest or forgets the whole matter.  The IPO happens.  Their plan works out just how they wanted.

Title: Re: Folio and IRAs
Post by: lcdude on October 30, 2013, 02:21:57 PM
Stop being retards everyone!!! Buying a loan on Folio in a Self-directed IRA is no different than buying any other allowed asset in a Self-directed IRA. You can, for example, buy a rental property in a Self-directed IRA. Transferring cash to a counterparty's non-IRA from your IRA account and transferring a house from a counterparty's non-IRA account to your IRA are not distributions and contributions, idiots! Same goes for the rental income from an IRA-held rental property - when a tenant wires rental cash to your IRA it's not a contribution! There is no difference here between dealing in houses and dealing in Folio notes.
Title: Re: Folio and IRAs
Post by: Rob L on October 30, 2013, 02:25:16 PM
Welcome to the LA forum Icdude.
Title: Re: Folio and IRAs
Post by: DanB on October 30, 2013, 02:42:01 PM
Stop being retards everyone!!! Buying a loan on Folio in a Self-directed IRA is no different than buying any other allowed asset in a Self-directed IRA. You can, for example, buy a rental property in a Self-directed IRA. Transferring cash to a counterparty's non-IRA from your IRA account and transferring a house from a counterparty's non-IRA account to your IRA are not distributions and contributions, idiots! Same goes for the rental income from an IRA-held rental property - when a tenant wires rental cash to your IRA it's not a contribution! There is no difference here between dealing in houses and dealing in Folio notes.

I'm not sure if this comment falls within the guidelines for a "civil discourse" around here. Of course on the upside, the newbie didn't accuse anyone of being a Nazi or make any reference to Hitler,....................so we still have that.  :)
Title: Re: Folio and IRAs
Post by: core on October 30, 2013, 02:44:23 PM
Quote
Stop being retards everyone!!!

lcdude, do you work for LendingClub?  I'm only asking because of the "LC" in your name.  Oh and I guess it was something about your choice of words for us investors.  I can't put a finger on it.  :)

You do make perfectly valid points, but none of this changes the fact that LC's own site says that notes cannot be traded.  That snippet, as you may recall, is what started this whole thread.  If what you say is true and the law agrees, then it should be a simple matter for LC to remove that snippet from the site.  They have not done so.
Title: Re: Folio and IRAs
Post by: DanB on October 30, 2013, 02:52:00 PM
Core......... So you think there's another coverup/conspiracy going on.

Conspiracy, no.  Cover-up, yes maybe.  I'd sure call it a cover-up if after a company does something that could potentially cause big problems for others, they subsequently try to keep it quiet and/or has its account reps make up stories while they scramble to figure out a solution and damage control.  One definition of a cover-up is an attempt, whether successful or not, to conceal evidence of wrongdoing, error, incompetence or other embarrassing information.

I'd say this meets that definition.  The original event need not be intentional.  And it does not matter what their good intentions might be at a later date to fix the problem.  Do you have another word for this?  Not a Portuguese one, please.

Just out of curiosity, would this one be like the 6th or is it the 7th conspiracy or cover up that you've suspected, suggested or insinuated LC to be somehow involved in within just the last year? Because I've lost count since I was too busy keeping track of the ones you think I am party to in league with them. :)

If this is the 6th or 7th one then it would still have no relevance to anything but my own credibility.  And my credibility in turn has nothing to do with this incident.  All one has to do is read LC's own site, and then read the narratives of employee contact posted by others to see what is going on.  My posts have nothing to do with it.

Would somebody please get to the bottom of this before Core names this whole thing LCGate!
I'd volunteer to find out, being so close to SF & all, but that'll just make Core spin another conspiracy.

Dan, if you can come up with a plan, but all means do so, with all haste!  If you would like to volunteer I give my word that I will not accuse you of conspiring with LC on this particular matter.  I am eager to hear what your plan is though.  I hope you are not one of those people who thinks an in-person visit and a handshake means that you are somehow magically going to get a different truth (or lie) than an email or phone call would.  You are going to need to be more creative than that.  I know you have it in you.

For example, if would be rather unsatisfying if you walked in there and had a 10 minute chat with someone at LC and then came back here to post something like this:

"I have spoken with John Smith, the Chief Cover-up Guy at LendingClub.  He assures me that there are some exciting developments on this which I hope to be able to share with you in the coming weeks.  Stay tuned for details."

The details never come.  The cover-up continues until everyone loses interest or forgets the whole matter.  The IPO happens.  Their plan works out just how they wanted.

Hey wait a minute, Where have I read stuff like that before?  :)
BTW, just like our former President, I have the ability to look into someone's eyes & sense their soul. That & a handshake is how I do my car insurance, so I don't see the problem.  :)
Title: Re: Folio and IRAs
Post by: core on October 30, 2013, 03:09:39 PM
Hey wait a minute, Where have I read stuff like that before?  :)

I have no clue, Dan.   I simply made it up.  I was just trying to think of the absolute most unhelpful series of sentences that one might be tempted to string together after having been on an important fact-finding mission.

BTW, just like our former President, I have the ability to look into someone's eyes & sense their soul. That & a handshake is how I do my car insurance, so I don't see the problem.  :)

Well then get in there and smoke 'em out Dan!  Mano y mano.  I have little confidence that you will get the real truth with such a simple plan.  When you return with your report I'll be the decider.
Title: Re: Folio and IRAs
Post by: DanB on October 30, 2013, 08:52:35 PM
Hey wait a minute, Where have I read stuff like that before?  :)

I have no clue, Dan.   I simply made it up.  I was just trying to think of the absolute most unhelpful series of sentences that one might be tempted to string together after having been on an important fact-finding mission.

BTW, just like our former President, I have the ability to look into someone's eyes & sense their soul. That & a handshake is how I do my car insurance, so I don't see the problem.  :)

Well then get in there and smoke 'em out Dan!  Mano y mano.  I have little confidence that you will get the u]real[/u] truth with such a simple plan.  When you return with your report I'll be the decider.


Nah, it's ok. Besides, won't it be more fun for you to just entertain possible scenarios other than knowing the truth? Also I'm sure you've considered the possibility that even if I knew the truth or found out the truth..............I might just decide to "protect" you from it.  :)
Title: Re: Folio and IRAs
Post by: core on October 30, 2013, 10:15:22 PM
Besides, won't it be more fun for you to just entertain possible scenarios other than knowing the truth?

Perhaps.  But if I think up any more scenarios relating to this matter I'll have to keep them to myself, because I don't think lcdude's blood pressure can take any more.  It sure sounded like his head was going to pop right off of his body! 

Anger is the 2nd stage of grief, right after denial.  First we tell ourselves that the trading is perfectly legal and that nothing bad will happen to us or our accounts.  After all, why else would LC let us do it?  It's no different than real estate, yes that's it.  Eventually we realize this denial cannot continue and we become angry.  Taking out our anger on random individuals and the mentally challenged.  Then begins the bargaining stage.  "If I just stop trading now, everything will turn out all right for me."  This is followed by a bout of depression and withdrawal... not even wanting to check on your Folio sales for the day.  And finally acceptance.  Acceptance of the fact that you are doomed.

By the way, this thread is now #3 on the all-time most active threads list.  Right behind Sarah's complainypants thread.  All I did was ask a simple question, expecting a simple answer...
Title: Re: Folio and IRAs
Post by: Lloigor on November 05, 2013, 05:06:38 PM
Did no one here have an IRA account with them in 2012 and see if there was or was not a 1099-B issued?
Title: Re: Folio and IRAs
Post by: DanB on November 05, 2013, 06:07:52 PM
Did no one here have an IRA account with them in 2012 and see if there was or was not a 1099-B issued?

Peter had 2 IRAs with them in 2012.
Title: Re: Folio and IRAs
Post by: jimsar on November 05, 2013, 06:59:47 PM
Did no one here have an IRA account with them in 2012 and see if there was or was not a 1099-B issued?
Sorry, I don't understand - - - does "them" refer to Foliofn or to Lending Club? And why a 1099-B?  (I believe that's for barter income)

In my unexpert opinion, if you have IRA money in a Lending Club account under the custodianship of SDIRAServices, you're playing with fire by trading on Folio under said account.  I believe you run the risk of getting it deemed as an IRA distribution.  Folio is a separate broker-dealer, and I think they serve as their own retirement account custodian.  So, money under a separate custodian, i.e. SDIRAServices, cannot be taken out and invested/traded under another broker-dealer, unless of course you rolled it over to a SDIRAServices IRA account.  I'm not saying they (meaning LC and the two custodians) can't make some kind of arrangement in the future with the blessing of the IRS, but under current rules, I think you run the risk of committing a prohibited IRA transaction.

Title: Re: Folio and IRAs
Post by: core on November 05, 2013, 07:56:25 PM
I have just learned that in the very near future, Lending Club will be "electronically prohibiting" trades from within an IRA.  They are working with Folio legal to resolve the issue.  It doesn't sound like they know exactly what impact this will have on people who have already traded in their IRAs.


And why a 1099-B?  (I believe that's for barter income)

1099-B is issued whenever you sell anything with your broker... stocks, bonds, funds, and Folio notes.
Title: Re: Folio and IRAs
Post by: Rob L on November 05, 2013, 08:01:01 PM
I have learned a bit about the terminology of "IRA" speak.  An IRA rollover is the movement of funds between 2 types of retirement plans that may be different, such as from a 401(k) plan to an IRA. Rollovers may be subject to federal income tax unless all requirements are met. For example:

    You must complete the rollover within 60 days of receiving the funds (all IRAs)
    You may only roll over funds from the same IRA once every 12 months (Traditional and SEP IRAs)

An IRA transfer is the movement of funds between the same types of accounts, such as from one Traditional IRA to another Traditional IRA, where there is no distribution to you. The money is transferred directly from one financial institution to another on your behalf and is also known as a trustee-to-trustee or custodial transfer. Transfers can take place as often as you like, and they are not taxable.

It is clear what is needed here is for both the LC account and the Folio account to be the same type retirement plan, and the transfers be custodial transfer. My fear is that this is currently not the case and never has been.

Okay Core, while I was posting this, you posted a biggie. Spill the beans ... how do you know?
Title: Re: Folio and IRAs
Post by: core on November 05, 2013, 08:11:46 PM
Okay Core, while I was posting this, you posted a biggie. Spill the beans ... how do you know?

I didn't hear it from LC myself, and unfortunately I cannot name my source.  However I am completely confident that he/she got it straight from someone at LC.  There is still a slim chance that it's not correct, as often at LC the left hand knows not what the right hand is doing, but so far this is the most plausible response we've heard from them (secondhand).
Title: Re: Folio and IRAs
Post by: Rob L on November 05, 2013, 08:16:31 PM
Let me be the first to say I hope this is true. LC is finally doing the right thing, presuming my fears are not unfounded.
Title: Re: Folio and IRAs
Post by: New Jersey Guy on November 05, 2013, 08:22:42 PM
"Your loss is my gain"

Core...I couldn't stop laughing!!
Great Motto!
Title: Re: Folio and IRAs
Post by: core on November 05, 2013, 08:23:14 PM
Let me be the first to say I hope this is true. LC is finally doing the right thing, presuming my fears are not unfounded.

I certainly do not hope it is true, because I really had my heart set on some killer tax-free trading profits.  :)  I don't know if I can chalk this up as "doing the right thing".  In my opinion they are still engaged in a hush-hush operation.  Why did they not post something on their blog as soon as they figured out there was an issue?  Or at the very least tell the truth after people started calling in to ask?  If this is doing the right thing then I sure don't want to see the wrong thing.

I left out one important piece of the original information:  The source at LC says he/she does not expect the issue to be resolved soon.

"Your loss is my gain"

Core...I couldn't stop laughing!!
Great Motto!

Yes I must struggle to keep things fresh, you know.  That one came from an old PC space-based game, they had these villains called Retros who would say that line to you over the radio right before they blasted your ship apart and stole all of your cargo to resell for profit.  It seemed appropriate enough. ;)
Title: Re: Folio and IRAs
Post by: jimsar on November 05, 2013, 08:29:25 PM
I have learned a bit about the terminology of "IRA" speak.  An IRA rollover is the movement of funds between 2 types of retirement plans that may be different, such as from a 401(k) plan to an IRA. Rollovers may be subject to federal income tax unless all requirements are met. For example:

    You must complete the rollover within 60 days of receiving the funds (all IRAs)
    You may only roll over funds from the same IRA once every 12 months (Traditional and SEP IRAs)

An IRA transfer is the movement of funds between the same types of accounts, such as from one Traditional IRA to another Traditional IRA, where there is no distribution to you. The money is transferred directly from one financial institution to another on your behalf and is also known as a trustee-to-trustee or custodial transfer. Transfers can take place as often as you like, and they are not taxable.

It is clear what is needed here is for both the LC account and the Folio account to be the same type retirement plan, and the transfers be custodial transfer. My fear is that this is currently not the case and never has been.

Okay Core, while I was posting this, you posted a biggie. Spill the beans ... how do you know?

Rob L, here's another IRA Terminology: DIRECT ROLLOVER. 

"A direct rollover shares some characteristics of both a transfer and a rollover. Direct rollover assets are made payable to the qualified plan or IRA Custodian/Trustee, never to the individual.

A direct rollover is reportable but not taxable and there is no 60 day window to be concerned about."

Lest I be RandPaul'ed, the above quote is attributed to About.com's Investing for Begineers website.
Title: Re: Folio and IRAs
Post by: Rob L on November 05, 2013, 08:46:37 PM
First lets stop the bleeding. Core, your "I have no recollection, Senator" probably would not have worked anyway. I'm not saying LC did the right thing, but they will soon be taking the first step in doing the right thing. Yes, IRA / Folio trading should have been electronically stopped dead in its tracks the day LC posted that obscure but unambiguous message. Maybe it was the "deer in the headlights" effect. For the third or fourth time I'll say "this is a big deal"!

jimsar; it's alphabet soup and past my pay grade. Like a square peg in a round hole whatever you call it I fear IRA LC and Folio don't mix and never have.
Title: Re: Folio and IRAs
Post by: core on November 05, 2013, 09:03:24 PM
Now I'm wondering what this is going to do to the Folio market.  It's possible that a large percentage of Folio buyers might be doing their buying in an IRA and don't even have a taxable account.  I would be interested in those stats.  Once all those people can no longer buy the market could absolutely plummet.  (Or maybe it will skyrocket, if they were all sellers?)  Hell if I know.  Looks like I picked the wrong week to stop sniffing glue.

Are they going to warn people, or just abruptly shut things down?  If I was holding notes that I didn't really want to hold, I would be absolutely fuming when I got stuck holding a 5-yr portfolio of absolute crap with no way to sell it.  After the announcement there could be quite some deals to be found.  Man this could be a mess for a while.  Just when I thought the note market was recovering.
Title: Re: Folio and IRAs
Post by: GS on November 05, 2013, 09:27:56 PM
This blows.  My strategy is built around selling notes if their FICO slips.  I never would have opened an IRA under these conditions, and now I feel my money is trapped there since there is no way to exit, ... outside of letting my notes die off for the next 5 years. 
Title: Re: Folio and IRAs
Post by: jimsar on November 06, 2013, 02:34:52 AM
jimsar; it's alphabet soup and past my pay grade. Like a square peg in a round hole whatever you call it I fear IRA LC and Folio don't mix and never have.
I'm afraid you're right, so please indulge me while I add more alphabets to the soup: SOL and IRS .  If taxman declares Folio transactions as IRA distribution, well, you get the picture.

Title: Re: Folio and IRAs
Post by: nonattender on November 06, 2013, 09:24:07 AM
Did someone drop a dime on all the self-dealing and IRA stuffing that I presume goes on or is there really a structural legal issue wrt LC/F?
Title: Re: Folio and IRAs
Post by: DanB on November 06, 2013, 01:40:13 PM
Did someone drop a dime on all the self-dealing and IRA stuffing that I presume goes on or is there really a structural legal issue wrt LC/F?

A conspiratorial mind might even suggest that perhaps a reasonably intelligent hardcore LC member might have dropped the dime in exchange for immunity on some other white collar criminal activity they may have engaged in. Of course I would never suggest or believe something like this to be possible but you never know, I suppose.  :)
Title: Re: Folio and IRAs
Post by: Rob L on November 06, 2013, 07:50:59 PM
I wondered if, embedded in all the changes today, was the electronic prohibition of IRA accounts listing notes on Folio. It, so far at least, was not. I just successfully listed a note (at a ridiculous premium) for about 20 seconds. Took it right back down again, but LC still let me do it.

Must be all those wonderful upgrades made to the trading platform today were much more important than this triviality.
Title: Re: Folio and IRAs
Post by: neals384 on November 18, 2013, 11:05:01 AM
I have no P2P IRA, my interest here is academic. I wonder a few things. Does Prosper allow IRA/Folio trading? I don't find anything on the Prosper website saying either way. Is there any potential liability (to either investors to the the gov't) on LC and P for allowing improper trades?

When Prosper first allowed IRA accounts they prohibited Folio trading.  Starting sometime earlier this year, folio trading for IRAs is now allowed.  No explanation was given, but one supposes the delay was for them to resolve iRS issues. 
Title: Re: Folio and IRAs
Post by: lender_john on November 18, 2013, 02:51:09 PM

I'm just wondering what the best course of action is for those in Folio only states that have an IRA.

Just sit there and wait for clarification from LC?
Wait for years and then transfer to a different IRA?

It seems like if this was resolved at Prosper, they could allow trading again at LC.
Title: Re: Folio and IRAs
Post by: core on November 18, 2013, 03:21:49 PM
I'm just wondering what the best course of action is for those in Folio only states that have an IRA.

I didn't know that was even possible.  Earlier this year I know someone who tried to open one and LC said they were unable to open IRAs for Folio-only people.  If I remember correctly SarahV also had similar experiences.
Title: Re: Folio and IRAs
Post by: lender_john on November 18, 2013, 03:45:13 PM

It was certainly possible and has been possible for years. I would assume, as you said, that it is not allowed now.

This puts the owner in quite a potential pickle.. as their only interaction with the notes has been through Folio.

If there is a problem, the blame is clearly on LC here... They advertised the IRA, allowed the creation and they well know that the only way for the person to buy notes is through Folio.
Title: Re: Folio and IRAs
Post by: Inflationhawk on November 23, 2013, 02:55:48 PM
New to P2P.  So if I am reading this right, Prosper allows IRAs to trade on Folio, but you can't sell late notes.  On LC, you can sell late notes on Folio, but you can't trade on Folio in an IRA account.  Sounds like with LC, it's just a matter of time to get it approved since Prosper is already doing it.  But, with Prosper, is there any thought on them ever allowing late notes to be sold on Folio?  Overall, I like LC better and have started funding an IRA account, but I'm kinda bummed about the folio restriction which I didn't know about until after I signed up.  Based on what I'm reading, it seems likely LC will get this worked out...I hope!  Learning a lot on here, thanks for all the great posts.
Title: Re: Folio and IRAs
Post by: Rob L on December 01, 2013, 07:00:18 PM
Just briefly tested the waters and I am still able to list notes list notes for sale, even though my account is IRA.
So far LC has not "done the right thing" and electronically prohibited this.

Core: talk to deep throat again and see what gives.
Title: Re: Folio and IRAs
Post by: GS on December 01, 2013, 08:44:19 PM
Hopefully the fact that LC had not yet cut off folio sales is because they are trying to resolve the issue (whatever the issue may be) without cutting off their users.  This may also explain why they only posted the notice in some obscure location on the website rather than in a more obvious location, like the click through screen.  Or ... Maybe current users are permanently grandfathered in ...
Title: Re: Folio and IRAs
Post by: core on December 01, 2013, 08:53:40 PM
Core: talk to deep throat again and see what gives.

Deep Throat is unlikely to have additional information as he is not directly mixed up in the LC Plumbers operation.  But keep in mind one man's "soon" is another man's "later".  If I get any other information I will of course report it.  Too bad Tricky 'Peter' is sworn to secrecy, as I'm sure he already has a full article prepared.  Chock full of propaganda about how this is a good thing for P2P, how 99% of investors are not affected, and of course completely dodging the issue of the cover-up.

If you want my conspiratorial guess, I would say LC is planning on conveniently taking advantage of the new year to further their deceit.  Reminds me of Tet back in 'Nam! 

Here's how I think it's going to go down:  On Dec 30th they will announce that due to "changing tax laws", trading in an IRA will not be allowed as of Jan 1 2014.  (Trades will need to be settled before then, thus the advance notice.)  Tax laws are always "changing", so this will not be a direct lie.  They will be hoping investors don't put 2 and 2 together and realize they might be in a pickle for previous years.  If nobody gets tagged by the IRS and gets vocal about it, LC gets off scott free.  They can quietly settle with those that do get snagged.  But by the time the lumbering IRS gets around to going after people, I think the statute of limitations will already be expired for civil matters such as this so you may find it difficult to sue LC.  You will, of course, still be on the hook for the tax bill.
Title: Re: Folio and IRAs
Post by: DanB on December 01, 2013, 10:06:40 PM
Core: talk to deep throat again and see what gives.

Deep Throat is unlikely to have additional information as he is not directly mixed up in the LC Plumbers operation.  But keep in mind one man's "soon" is another man's "later".  If I get any other information I will of course report it.  Too bad Tricky 'Peter' is sworn to secrecy, as I'm sure he already has a full article prepared.  Chock full of propaganda about how this is a good thing for P2P, how 99% of investors are not affected, and of course completely dodging the issue of the cover-up.

If you want my conspiratorial guess, I would say LC is planning on conveniently taking advantage of the new year to further their deceit.  Reminds me of Tet back in 'Nam! 

Here's how I think it's going to go down:  On Dec 30th they will announce that due to "changing tax laws", trading in an IRA will not be allowed as of Jan 1 2014.  (Trades will need to be settled before then, thus the advance notice.)  Tax laws are always "changing", so this will not be a direct lie.  They will be hoping investors don't put 2 and 2 together and realize they might be in a pickle for previous years.  If nobody gets tagged by the IRS and gets vocal about it, LC gets off scott free.  They can quietly settle with those that do get snagged.  But by the time the lumbering IRS gets around to going after people, I think the statute of limitations will already be expired for civil matters such as this so you may find it difficult to sue LC.  You will, of course, still be on the hook for the tax bill.


Cover up? Please...............Keep moving, there's nothing to see here.  :)

Also...........Peter has been called many things, but until now he hasn't been called "tricky" before. I can be pretty tricky at times & I'm a bit offended that you are attributing Peter (of all people) with those attributes. Attributes that imo he is not shown to be worthy of, & is possibly not even capable of attaining.  :)
Title: Re: Folio and IRAs
Post by: core on December 01, 2013, 11:09:18 PM
Do not be offended Dan.  And I agree the adjective doesn't really fit him.  Rob's watergate reference was simply begging for the use of the double meaning.  If it makes you feel any better I will try to work "Tricky DanB" in somewhere, if possible.  It might be a long wait.

And yes, it IS a cover-up.  We have been through this before.  Last time I even cited a definition of the term for you English-challenged folks.  You had better come up with something better than "there's nothing to see here".  That's exactly what people say when there is something to see.
Title: Re: Folio and IRAs
Post by: DanB on December 02, 2013, 01:26:55 AM
There's no cover up because imo there needs to be a minimum number of interested parties in order for the act of covering up to be even necessary. As far as I can tell, it appears to be just you Core & "several" of your followers.  :) No one else seems to know &/or care. So not really necessary for a "cover up" to be put into motion even if there was something worthy of being covered up. Besides, I'm sure that in the fullness of time, a perfectly acceptable explanation will be manufactured, I mean stated, which will alleviate each & every one of your concerns.  :)

PS............For this post, I am not using the regular definition of several. I'm using what is known as the Renton definition of the word, which is substantially broader.
Title: Re: Folio and IRAs
Post by: rlv99 on December 02, 2013, 01:58:42 PM
Hey Dan

Your girlfriend should put that last post of yours in her book.  It is truly a classic and representative of who you really are!  A champion of the oppressed!!!     8)
Title: Re: Folio and IRAs
Post by: DanB on December 02, 2013, 05:23:01 PM
Rlv99..........Thank you, but deep down I like to think that I'm more suited to be a champion of all the people, not just the "oppressed".

Let's face it, there are some less tolerant than myself who argue that the whole "oppressed" thing is over blown & mostly just a state of mind anyway. For example, they would state that Core thinks he's being oppressed every time some new rule change complicates his God given right to make obscene profits on Folio. Or that Jesse Jackson often flies around the country on private jets, then steps off the plane & gives speeches about feeling "oppressed" in America,................. despite living more comfortably & being wealthier than 99.5% of the people. Finally, countless thousands (maybe millions) of Arabs throughout the Mid East blame the Israelis for oppression (on a weekly basis) when their lights go out or their water pressure isn't up to snuff. 

As for myself, I just want to make the world a better place, & I truly appreciate your confidence & unflinching support. :)
Title: Re: Folio and IRAs
Post by: viking on December 08, 2013, 02:58:27 AM
It is difficult to try to draw any conclusions from this thread; Does the sell of notes in the IRA account result in a distribution (and do the proceeds constitute a contribution)?

Did I miss it, or did anyone with an IRA trade on Folio last year? If so, did they get any distribution and/or contribution tax forms?

I would be surprised if no one here with an IRA account traded on Folio?
Title: Re: Folio and IRAs
Post by: core on December 08, 2013, 05:42:32 AM
Did I miss it, or did anyone with an IRA trade on Folio last year? If so, did they get any distribution and/or contribution tax forms?

Nobody would have gotten any forms such as that or would have been alerted to anything nasty because LC didn't think anything was amiss at the time.  If they knew that was the situation in 2012 they wouldn't have allowed it in the first place, and certainly would have done something before now.

Title: Re: Folio and IRAs
Post by: Inflationhawk on December 08, 2013, 08:10:44 AM
I suspect they are dealing with the IRS as we speak on a resolution.  I seriously doubt anyone that traded on an IRA account will have it treated as a distribution this year.  LC probably convinced the IRS it would be a quicker resolution (i.e. by tax year 2014) to set up IRA LC accounts to be linked to IRA folio accounts than to systematically restrict the current LC IRA accounts from trading with nonIRA Folio accounts, and the IRS allowed them to just put a restriction notice on their website as an interim solution.  I believe we'll see a resolution before the new year.  I'd also guess that in 2014 any trading on non IRA folio accounts would be treated as a distribution by the IRS.
Title: Re: Folio and IRAs
Post by: Randawl on December 08, 2013, 11:49:31 AM
I opened a new Roth for my wife last month, "applied" for a Folio account and was "approved."  First trades settled successfully on Friday.

They are not placing any restrictions on new IRA accounts that attempt to use Folio.
Title: Re: Folio and IRAs
Post by: Rob L on December 08, 2013, 12:33:56 PM
I opened a new Roth for my wife last month, "applied" for a Folio account and was "approved."  First trades settled successfully on Friday.
They are not placing any restrictions on new IRA accounts that attempt to use Folio.

The only restriction is a very clear and unambiguous notification on the LC website that it isn't permitted.
At this point LC and the IRS can claim you were warned.

I am still puzzled by why LC continues to electronically permit IRA account / Folio trades. That's a question I'd love to see asked and answered.
Currently I would never consider trading notes on Folio from my IRA. Call me a wimp, but it's liable to be quite a mess.

When I checked out LC as a potential investment this past April there was no such prohibition (at least not one known to LC with notification provided to its customers). I decided at that time that an LC investment was appropriate for some of my IRA. This decision was in no small part due to the liquidity provided by Folio should I decide to liquidate my account. Only months later after I'm my first round of funding is fully invested did I learn (not from LC but via a forum post here) that I have no option to liquidate and must hold all notes to maturity in 3-5 years.  Kind of an important point to omit from the prospectus don't you think? Gee, I hate it when the rules are changed in the middle of the game.

Eventually LC will provide an IRS compliant mechanism (Prosper already provides one I understand). Until then I'll hold back on adding funds to to my LC IRA account to see the details.

Title: Re: Folio and IRAs
Post by: core on December 08, 2013, 01:00:25 PM
Gee, I hate it when the rules are changed in the middle of the game.

You should be used to it by now, Rob.  That's the only way LC knows how to play the game.

I have lost count of the number of times LC has made major changes that weren't part of the deal from the beginning and obviously not disclosed in the prospectus.  Issues that would have affected my decision to invest in certain notes had I known the information in the first place.  Some of those other items alone might be grounds for lawsuits.  To say nothing of this deal.  I hope they get their rear ends handed to them on this one.
Title: Re: Folio and IRAs
Post by: Randawl on December 08, 2013, 01:27:19 PM
I opened a new Roth for my wife last month, "applied" for a Folio account and was "approved."  First trades settled successfully on Friday.
They are not placing any restrictions on new IRA accounts that attempt to use Folio.

The only restriction is a very clear and unambiguous notification on the LC website that it isn't permitted.
At this point LC and the IRS can claim you were warned.

I am still puzzled by why LC continues to electronically permit IRA account / Folio trades. That's a question I'd love to see asked and answered.
Currently I would never consider trading notes on Folio from my IRA. Call me a wimp, but it's liable to be quite a mess.

When I checked out LC as a potential investment this past April there was no such prohibition (at least not one known to LC with notification provided to its customers). I decided at that time that an LC investment was appropriate for some of my IRA. This decision was in no small part due to the liquidity provided by Folio should I decide to liquidate my account. Only months later after I'm my first round of funding is fully invested did I learn (not from LC but via a forum post here) that I have no option to liquidate and must hold all notes to maturity in 3-5 years.  Kind of an important point to omit from the prospectus don't you think? Gee, I hate it when the rules are changed in the middle of the game.

Eventually LC will provide an IRS compliant mechanism (Prosper already provides one I understand). Until then I'll hold back on adding funds to to my LC IRA account to see the details.

Yea I know - there's an obvious disconnection between what they are "saying" and what's actually happening.  They could easily have flipped a switch so that IRA accounts (especially new ones) didn't have the option to "apply" for Folio access.  Even worse is that they individually "approve" IRA access to Folio on a daily basis. 

I'm not particularly interested in the liquidity aspect of Folio for my IRA's. I just like it because it makes me a lot more money.
Title: Re: Folio and IRAs
Post by: Rob L on December 08, 2013, 02:36:36 PM
A couple more random thoughts:

1) I believe LC was blissfully ignorant of this situation until they posted the notice sometime mid-year. It does strain credibility to imagine this of a financial industry company with literally a who's who list of board members, but the ball does sometimes get dropped (ask Stevan Ridley). So, in prior years IRA investors that traded Folio did not receive a 1099-R for distributions (for LC notes or cash transferred to their non-IRA Folio account), nor a form 5498 for IRA contributions (notes or cash transferred from their Folio account into their LC IRA account). Now that LC is well aware of the situation I can't see how they could possibly avoid sending them to investors in 2013. Surprise!

2) To remedy the situation your Folio account must be an IRA compatible with your LC IRA account, and the transfers custodian to custodian. Presently it seems the basis of the problem is that LC investor Folio accounts are not IRA. LC IRA investors will most probably be required to open new IRA Folio accounts if they want to trade notes. More book keeping work will be required of Folio as well as annual distribution of the required IRS forms to investors. Doubtful this will be free; Folio fees may rise for LC IRA investors.
Title: Re: Folio and IRAs
Post by: core on December 08, 2013, 03:47:28 PM
More book keeping work will be required of Folio as well as annual distribution of the required IRS forms to investors. Doubtful this will be free; Folio fees may rise for LC IRA investors.

I highly doubt fees would rise just because of that.  It seems like the IRA paperwork is far less work for them than the 1099-B's that they already have to distribute for taxable accounts.
Title: Re: Folio and IRAs
Post by: Inflationhawk on December 08, 2013, 08:41:10 PM
I don't see any investors getting "screwed" on this that traded during tax year 2013, however I certainly wouldn't test the waters now that its known there is an issue trading on Folio from an LC IRA account.  I have no proof, but my guess would be that the IRS came knocking on LC's door and said you have this set up incorrectly and get your act in gear. They gave them a deadline to fix it and told them to stop allowing trading.  LC probably negotiated to add a strongly worded statement to their site for now so they didn't have to spend resource time blocking trading systematically and committed to get it all fixed by tax year 2014.  Since at the end of the day trading will not be an issue with IRAs once its set up properly, I really doubt the IRS is going to come after anyone individually.  There very well may be a fee/penalty behind the scenes that LC has to pay the IRS though. 
Title: Re: Folio and IRAs
Post by: Bohb Daishi on December 09, 2013, 03:04:44 AM
More book keeping work will be required of Folio as well as annual distribution of the required IRS forms to investors. Doubtful this will be free; Folio fees may rise for LC IRA investors.

I highly doubt fees would rise just because of that.  It seems like the IRA paperwork is far less work for them than the 1099-B's that they already have to distribute for taxable accounts.

It's highly likely that the 1099-B process is entirely automated, so there is very little work on that end.
Title: Re: Folio and IRAs
Post by: core on December 19, 2013, 09:39:09 PM
Randawl posted this in another thread:

Speaking of shutting down Folio for IRAs. . . Check out this new pararaph LC is using in their emails when responding to IRA applications from lenders:

Please note that individual retirement accounts (IRA) may not participate in the Note Trading Platform, which means that you will not be able to purchase or sell Notes on the secondary market. Lending Club Notes purchased through an IRA must be held through maturity.

When I opened my wife's IRA about a month ago, this paragraph was not included in the correspondence.

It seems they are slowly moving in that direction.  If they thought they were going to have things worked out they wouldn't be increasing the visibility of that snippet.  Strange that they are doing absolutely nothing to let more people know ahead of time. 

And before anyone says it.... Grandfathering such a thing makes no sense to me.  Either a thing is legal tax-wise or it is not.   The IRS does not look at individual companies and give their blessings to every newfangled thing that pops up.  Custodians and taxpayers are responsible for adhering to the tax laws as they stand.  Certainly the IRS and the tax court can interpret.  The IRS doesn't grandfather people who got involved in a situation which wasn't legal in the first place.  LC itself could grandfather IRA account holders but only if it was kosher in the first place.  Which would mean it would still be legal for new users, so what would be the point in shutting them out.

There's only 11 days left before they'll have to wind things down for IRA holders if they're going to do so by the end of the year.  I still think odds are fair they'll do so but I would have expected more communication by now.  Wait a minute, what am I thinking?  This is Lending Club.  The champs of telling customers important things after the fact.  I'll bet the sinister network of journalists knows exactly what's going on though.
Title: Re: Folio and IRAs
Post by: GS on December 20, 2013, 08:48:17 AM
We don't even know for sure if this is about taxes and legality.  It could be that Folio wants to cut off IRA accounts because of the additional accounting and paper work burden.  Or maybe Folio told LC they want an additional yearly fee to handle IRA accounts and LC balked, since they advertise free IRAs if you have over $10K.  So far, the "tax problem theory" is just theory.
Title: Re: Folio and IRAs
Post by: Beekaycee on December 20, 2013, 09:17:08 AM
We don't even know for sure if this is about taxes and legality.  It could be that Folio wants to cut off IRA accounts because of the additional accounting and paper work burden.

This rings true to me, GS
Title: Re: Folio and IRAs
Post by: core on December 20, 2013, 09:33:49 AM
True, it is only a theory.  But if Folio and LC are having a disagreement, why would LC post that message saying that trading was prohibited _months_ ago, and on a page that few people are likely to see?  And not do anything further since then?  It would make far more sense to not say a word until they were confident no agreement could be reached or when trading was about to be shut down..  If they wanted to rally support or something then it would have been much more visible.  In either case it probably would have been worded with a more cautious tone.

Everything about this screams C.Y.A. to me.
Title: Re: Folio and IRAs
Post by: Inflationhawk on December 20, 2013, 09:47:22 AM
Randawl posted this in another thread:

Speaking of shutting down Folio for IRAs. . . Check out this new pararaph LC is using in their emails when responding to IRA applications from lenders:

Please note that individual retirement accounts (IRA) may not participate in the Note Trading Platform, which means that you will not be able to purchase or sell Notes on the secondary market. Lending Club Notes purchased through an IRA must be held through maturity.

When I opened my wife's IRA about a month ago, this paragraph was not included in the correspondence.

It seems they are slowly moving in that direction.  If they thought they were going to have things worked out they wouldn't be increasing the visibility of that snippet.  Strange that they are doing absolutely nothing to let more people know ahead of time. 

And before anyone says it.... Grandfathering such a thing makes no sense to me.  Either a thing is legal tax-wise or it is not.   The IRS does not look at individual companies and give their blessings to every newfangled thing that pops up.  Custodians and taxpayers are responsible for adhering to the tax laws as they stand.  Certainly the IRS and the tax court can interpret.  The IRS doesn't grandfather people who got involved in a situation which wasn't legal in the first place.  LC itself could grandfather IRA account holders but only if it was kosher in the first place.  Which would mean it would still be legal for new users, so what would be the point in shutting them out.

There's only 11 days left before they'll have to wind things down for IRA holders if they're going to do so by the end of the year.  I still think odds are fair they'll do so but I would have expected more communication by now.  Wait a minute, what am I thinking?  This is Lending Club.  The champs of telling customers important things after the fact.  I'll bet the sinister network of journalists knows exactly what's going on though.

Agree that grandfathering makes no sense and that would not occur.  Also agree that IRS would not "look at individual companies and give their blessings to every newfangled thing that pops up."  As such does this mean you think Prosper is going to stop allowing trading on IRA accounts?  Why would the IRS allow Prosper to do it and not LC?  Or do you think this has nothing to do with the IRS and is a dispute between LC and Folio? 

From my discussion about this with an LC rep, I got the strong indication (but no direct confirmation) that this was likely a temporary situation and not a unilateral decision by LC to stop allowing trading on IRA accounts permanently. 

I'll stand by my theory that this is a temporary situation and that eventually trading on IRA accounts will be overtly allowable by LC in time.  I have no idea whether it's IRS related or a dispute between LC and Folio.  I was thinking IRS, but could see it also being a dispute with Folio.  For those that have been actively trading the latter is obviously better.
Title: Re: Folio and IRAs
Post by: GS on December 20, 2013, 11:35:01 AM
True, it is only a theory.  But if Folio and LC are having a disagreement, why would LC post that message saying that trading was prohibited _months_ ago, and on a page that few people are likely to see?  And not do anything further since then?  It would make far more sense to not say a word until they were confident no agreement could be reached or when trading was about to be shut down..  If they wanted to rally support or something then it would have been much more visible.  In either case it probably would have been worded with a more cautious tone.

Everything about this screams C.Y.A. to me.

Core, your guess is probably better than mine.  Whatever is happening (and note, I'm not ruling out the tax liability theory) I think LC posted the notice so that when/if something does change (and I expect we'll know by Jan 1st if something is going to change) they can tell angry investors who were cut off from Folio (if that is what indeed will happen) that they shouldn't be surprised because they posted the notice (in some obscure corner) on their website months ago...

But by my way of thinking, whether it is an IRA fee dispute or a tax problem, either one should have a workable solution.  Perhaps it's both.  Maybe the SEC or IRS told LC/FolioFN that they need to create IRA accounts for Folio transfers, and Folio said we can do that, but we want a $100/yr IRA account fee per customer ... and it's turned into a stand off...

Who knows.  Some answers and clarity would be nice.  Folio is a part of my strategy and I don't like investing when the rules are changed mid-game. 
Title: Re: Folio and IRAs
Post by: edward on December 20, 2013, 01:24:29 PM
If that's the case, I wouldn't mind paying the $100/yr in order to maintain access to Folio trading. In that case, just let the investors choose if they want to pay for it or not.
Title: Re: Folio and IRAs
Post by: Rob L on December 20, 2013, 01:46:56 PM
For now it's all a know unknown.

I'm IRA and I haven't traded any Folio notes in many months nor bought any fresh notes since 12/6 (probably should have stopped that even sooner).
I'll decide what to do when this becomes a known known. I will not lock down my investment with no escape for 36/60 mo. If trapped (after the fact) at least my account run off has already begun.

I do believe something reasonable will be worked out in the future, but for the past and now it looks like a probable tax mess.
Also I too wonder if LC will electronically shut down IRA/Folio trading on or before 12/31 to prevent this spilling into the next year as mentioned above.
Title: Re: Folio and IRAs
Post by: Randawl on December 20, 2013, 02:46:25 PM
I hope I'm wrong, but at this point I think the most likely scenario is LC is playing CYA.  They're just not sure yet how to deal with all of the IRA accounts that have traded or are actively trading.  They don't have any clarity from the IRS and who knows what the correspondence between LC and Folio is at this point regarding this issue.
Title: Re: Folio and IRAs
Post by: core on December 20, 2013, 10:02:24 PM
Perhaps it's both.  Maybe the SEC or IRS told LC/FolioFN that they need to create IRA accounts for Folio transfers, and Folio said we can do that, but we want a $100/yr IRA account fee per customer ... and it's turned into a stand off...

Heyyy, I like that one even better.  LC screws up in the beginning when setting this up.  FolioFN knows they have them bent over a fire and tries to get more money.  Back room deals gone sour.  A cover up.  It's got all the makings of a good movie.

This all, however, is missing the more important issue which is what happens to all the people who have already traded.  Some could have traded many multiples of their entire account value.  There could be a lot of money on the line just for past misdeeds.  A new deal will not change that.
Title: Re: Folio and IRAs
Post by: Rob L on December 21, 2013, 06:24:23 PM
Not to quote myself, but to quote myself:

Folio fees may rise for LC IRA investors.

If Folio wants more money to implement LC IRA street legal, then where will it come from?
Title: Re: Folio and IRAs
Post by: core on December 22, 2013, 12:28:07 AM
If Folio wants more money to implement LC IRA street legal, then where will it come from?

The money will come from you, the customer.  You pay for it, you die, and you go to hell.  That's how it always works.  LC has absolutely no motivation to keep a relatively small group of IRA investors happy.  Certainly not enough motivation to dip into their own profits.  There are people literally waiting in line to invest, so from LC's perspective, if they have to lose a very small few in order to not cave into Folio's demands then that's perfectly OK.  If I was LC, I'd tell Folio to go stick it.  And then I'd go start looking for another broker-dealer to handle the rest of the non-IRA accounts too.  For whenever the existing contract is up.

From an investor perspective though, $100/yr per account, paid by the investor, isn't unreasonable at all.  I'd gladly pay that.
Title: Re: Folio and IRAs
Post by: Rob L on December 22, 2013, 10:25:13 AM
From an investor perspective though, $100/yr per account, paid by the investor, isn't unreasonable at all.  I'd gladly pay that.

Agreed; and hope for some resolution along those lines (and soon) though haven't ruled out a possible increase of the 1% sale fee for IRA accounts as well.
Not that IRA accounts are more costly to administer, but why not increase the fee. We're stuck with no way out.
Title: Re: Folio and IRAs
Post by: core on December 22, 2013, 01:22:32 PM
Agreed; and hope for some resolution along those lines (and soon) though haven't ruled out a possible increase of the 1% sale fee for IRA accounts as well.
Not that IRA accounts are more costly to administer, but why not increase the fee. We're stuck with no way out.

Well you can't exactly say that we're stuck if you're using that reason as justification for raising the trading fee.  Logically, if there is an increased trading fee, then trading has to occur.  If trading can occur then you are not stuck. ;)

I really don't think they would ever increase the trading fee to 2% or whatever just for IRA accounts.  That seems like it would be an absolute mess, and cause mass confusion especially for those traders who apparently couldn't figure out what negative yield meant back when that was allowed.  Plus in that situation Folio couldn't get their grubby little hands on more cash from people that only buy discounted notes on Folio for their IRA and hold them.
Title: Re: Folio and IRAs
Post by: Rob L on December 27, 2013, 09:32:46 AM
Ran another quick test this AM and can still sell list notes for sale from my IRA account on Folio. If LC plans to electronically stop this "prohibited" practice before the new year they are certainly waiting until the last moment to do so.
Title: Re: Folio and IRAs
Post by: RaymondG on December 29, 2013, 12:51:20 AM
Not sure if anyone already mentioned it. The post is too long for me to go through all.

If IRAs can buy/sell loans in Foliofn, then people who has one regular LC account and one LC IRA account can gain enormous benefits since Foliofn is not a fully liquid market.

case 1. He can sell *Late* loans from his IRA to his regular LC account on full remaining principal or even above. So his IRA account will never have lose, and he can claim tax deduct on the likely defaulted loans now *transferred* to his regular LC account.
case 2. He can sell good loans from regular LC account to his IRA at price much lower. His IRA account can have unreasonable high return (in theory, whatever return you want), while he can also claim tax deduct on the sells that *lose* money in his regular LC account.

My 2 cents.
Title: Re: Folio and IRAs
Post by: Zach on December 29, 2013, 01:13:44 AM
Not sure if anyone already mentioned it. The post is too long for me to go through all.

If IRAs can buy/sell loans in Foliofn, then people who has one regular LC account and one LC IRA account can gain enormous benefits since Foliofn is not a fully liquid market.

case 1. He can sell *Late* loans from his IRA to his regular LC account on full remaining principal or even above. So his IRA account will never have lose, and he can claim tax deduct on the likely defaulted loans now *transferred* to his regular LC account.
case 2. He can sell good loans from regular LC account to his IRA at price much lower. His IRA account can have unreasonable high return (in theory, whatever return you want), while he can also claim tax deduct on the sells that *lose* money in his regular LC account.

My 2 cents.

While this is POSSIBLE to do, it is very clearly illegal as per this previous thread: http://www.lendacademy.com/forum/index.php?topic=506 (http://www.lendacademy.com/forum/index.php?topic=506)
Title: Re: Folio and IRAs
Post by: RaymondG on December 29, 2013, 01:18:34 AM
Not sure if anyone already mentioned it. The post is too long for me to go through all.

If IRAs can buy/sell loans in Foliofn, then people who has one regular LC account and one LC IRA account can gain enormous benefits since Foliofn is not a fully liquid market.

case 1. He can sell *Late* loans from his IRA to his regular LC account on full remaining principal or even above. So his IRA account will never have lose, and he can claim tax deduct on the likely defaulted loans now *transferred* to his regular LC account.
case 2. He can sell good loans from regular LC account to his IRA at price much lower. His IRA account can have unreasonable high return (in theory, whatever return you want), while he can also claim tax deduct on the sells that *lose* money in his regular LC account.

My 2 cents.

While this is POSSIBLE to do, it is very clearly illegal as per this previous thread: http://www.lendacademy.com/forum/index.php?topic=506 (http://www.lendacademy.com/forum/index.php?topic=506)

My point is that's why LC forbid IRAs trade loans in Foliofn, which is right.
Title: Re: Folio and IRAs
Post by: core on December 29, 2013, 01:39:56 AM
My point is that's why LC forbid IRAs trade loans in Foliofn, which is right.

If LC wanted to play IRS cop, then quietly posting the restriction on an obscure corner of the site and not even enforcing it hardly seems a good way to do so.
Title: Re: Folio and IRAs
Post by: Rob L on January 01, 2014, 01:32:33 AM
Happy New Year!
It is now 2014 (on the east coast) and I can still list notes from my IRA account for sale on Folio.
It seems strange when a company posts strict rules (after the fact in my case), but fails to enforce them as they can easily do.
Catch 22.

Update 1/1/2014, 10:45am EST; still possible to list notes for sale.
Wonder why there are no warnings on the Folio account summary page, sell page, etc.?
Title: Re: Folio and IRAs
Post by: pplinvestor on January 01, 2014, 01:06:06 PM
Perhaps, their software to enforce the rule is not working.  :)  It will take them some time to get it fixed.
Title: Re: Folio and IRAs
Post by: Randawl on January 03, 2014, 05:19:56 PM
Perhaps, their software to enforce the rule is not working.  :)  It will take them some time to get it fixed.

More than just that isn't working - a friend recently opened a new Roth with LC and received the new email stating, "Please note that individual retirement accounts (IRA) may not participate in the Note Trading Platform, which means that you will not be able to purchase or sell Notes on the secondary market. Lending Club Notes purchased through an IRA must be held through maturity." She was allowed to apply for a Folio account, was approved, and posted notes for sale today as her first batch of notes got issued.

I suppose all of that can be chalked up to enforcement software not working yet, but they didn't even take the most simple, basic step of not allowing IRA's to apply for Folio accounts yet. . . Why in the world do they have an "approval" process if they are not disapproving the only types of accounts that should not be approved?  All more of the same CYA if you ask me.
Title: Re: Folio and IRAs
Post by: core on January 03, 2014, 07:09:28 PM
She was allowed to apply for a Folio account, was approved, and posted notes for sale today as her first batch of notes got issued.

Wow.  Unbelievable.  They've really got me stumped on this one.  I was wrong on the date for them shutting down trading, even though it was the perfect 'out' for them, and now I really have no clue where they think they're going with this.  Why not have left the message buried on the web site if they had no intention of enforcing it?  Now more people are going to start asking questions that wouldn't have known any better before... and they will continue to get no answers.  Maybe this is all some sick joke to keep us entertained, or a diversion.  I think it's working.
Title: Re: Folio and IRAs
Post by: Simon on January 03, 2014, 07:22:02 PM
For what it's worth, I directly emailed management about this and was told I would receive a reply, a reply which never came.
Title: Re: Folio and IRAs
Post by: Rob L on January 03, 2014, 07:24:03 PM
Peter's 2014 predictions didn't mention this trivial matter. How will it be resolved?
Will LC customers that traded on Folio before the prohibition was obscurely posted  mid 2013 receive "Greetings" letters from the IRS?
Why do some IRA customers continue to blithely trade away; ignoring the warning? Don't ask, don't tell?
I wouldn't think of it, but maybe I'm just paranoid ("Only the paranoid survive" - Andy Grove).
Title: Re: Folio and IRAs
Post by: lender_john on January 04, 2014, 12:04:23 PM

I was really hoping for a clearer resolution at this point.

This leaves those of us in folio-only states who have IRAs that were started before any rule changes, in quite a pickle..
Title: Re: Folio and IRAs
Post by: GS on January 04, 2014, 01:08:16 PM
Peter's 2014 predictions didn't mention this trivial matter. How will it be resolved?
Will LC customers that traded on Folio before the prohibition was obscurely posted  mid 2013 receive "Greetings" letters from the IRS?
Why do some IRA customers continue to blithely trade away; ignoring the warning? Don't ask, don't tell?
I wouldn't think of it, but maybe I'm just paranoid ("Only the paranoid survive" - Andy Grove).

Well, if my taxes for 2013 were screwed up, then what difference does it make if I traded until Dec 31st?  I haven't traded yet in 2014 and I haven't decided if I'm going to or not. 

Besides, while it may be possible (we don't know anything, for sure) that 2013 IRA transfers were not handled properly, I doubt the IRS would go after the individual account holders, since the "spirit of the law" is that we can't get our hands on the tax free IRA money for non-investment use.  It should be pretty easy to show that, from my point of view, the money never left an investment account.  If it was unknowingly, and temporarily, moved outside of an IRA, then I certainly did not know or approve of that.  I still don't know if that happened or not.

The SEC may ring LC/Folio for some violation, but if anything (and assuming any of this is true), we'd probably be viewed as victims of a licensed securities firm's incompetence.  There is a reason why licenses and registrations are required, and that is because we put our money and faith in these professionals under the assumption that they know what they are doing and will not violate any regulations and laws in the process of handling our money.  The law doesn't look favorably on licensed professionals who screw up, since the entire point of licensing is to verify they are competent, for the purpose of "protecting the public".
Title: Re: Folio and IRAs
Post by: graceful on January 04, 2014, 01:19:06 PM
Ignorance of the law is no excuse.

Someone could say they relied on LC, but if that doesn't fly, you'll be open to some pretty serious consequences. I reserve the defense of having relied on someone else only for a desperation defense. Not generally a good policy to say, "I did it anyway because they let me." Of course, I try to minimize my exposure to lawyers, the IRS and financial expenses, so I may be too conservative for others who like to live on the wild side.

Graceful
Title: Re: Folio and IRAs
Post by: GS on January 04, 2014, 01:39:37 PM
I don't think that trusting a licensed securities firm to not break securities laws is exactly "living on the wildside".  It's like saying if I put my money in a legitimate bank, and that bank is found to be laundering drug money, then I'm in for "serious consequences" because I should have known better than to trust a bank with my money and I willfully participated in a crime.  Please.  I have no knowledge of what LC/Folio is doing with my money "behind the scenes", but I can assume only good and legal things.

I have not received (nor has anyone that I know of) any statement or explaination from LC stating that my past trades on folio have been in violation of SEC and IRS laws and regulations.  If they provided such a statement, I would immediately comply.  But right now, all we have is speculation and guesswork as to what is happening.  I'm still of the theory that this is just a fee dispute between LC/Folio until further notice.

If there was some kind of SEC or IRS investigation into how LC/Folio handled accounts, wouldn't that be public knowledge by now?  Wouldn't the IRS or SEC take direct action in notifying affected account holders that illegal transactions have been made without their knowledge?
Title: Re: Folio and IRAs
Post by: core on January 04, 2014, 02:38:13 PM
I have not received (nor has anyone that I know of) any statement or explaination from LC stating that my past trades on folio have been in violation of SEC and IRS laws and regulations.

No, you were just given a statement that you can't do it.  But you did it anyway, even after having seen the message.  They could come back and say you could or should have known that continued trading might worsen your circumstances.

Wouldn't the IRS or SEC take direct action in notifying affected account holders that illegal transactions have been made without their knowledge?

Nothing "illegal" has taken place.  And investigations are rarely public.  The government works slowly.  The message only appeared in what, September?  That could be when Lending Club's lawyers discovered there might be a serious problem.  Maybe some regulator told them but maybe they discovered it on their own.  We don't even know that anyone in D.C. knows anything about this. 

Maybe it's time to start talking to our representatives in congress just to get some answers.  There are a lot of freshman reps in the House right now who are likely dying for something to do.
Title: Re: Folio and IRAs
Post by: GS on January 04, 2014, 03:13:09 PM
Core,

If any of this is true, then I was already screwed for 2013 anyway ... I don't think the few trades I made after October make much of a difference.    But, as we already pointed out, how does posting a drastic policy change statement in "obscure corners" then not enforcing it, despite the fact that it could be easily enforced, qualify as notice?  Until November, at least, the Folio FAQs still said any LC member could participate, and I was unaware that had been changed until I checked today.   Apparently, if you call or email a question, you get no meaningful response.  I bet most users who use Folio and don't read Lend Academy have no idea this is even going on. 

My guess, if there is a tax related problem, is that LC and regulators are working out a solution, users will be held harmless, and it will be resolved without the IRS raiding my house.
Title: Re: Folio and IRAs
Post by: Rob L on January 04, 2014, 03:25:26 PM
Well, if my taxes for 2013 were screwed up, then what difference does it make if I traded until Dec 31st?  I haven't traded yet in 2014 and I haven't decided if I'm going to or not. 
The difference to me is the amount of money involved and worst case tax consequence. More money, larger consequences.

I'm hoping for the best and planning for the worst. My worst case isn't much of a problem. I'm very lucky in that regard. I opened my IRA account in 2013. Folio transactions were $17.05 notes purchased, $735.09 notes sold and $7.35 fees. So, given my Folio account may not be an IRA then I POSSIBLY "distributed" $752.14 from and "contributed" the same amount to my IRA. If I receive no IRS forms regarding these transactions and unless further clarification is provided I plan to include this in my 2013 tax filing as a precautionary measure. The "distribution" will essentially be added to my normal income, and the "contribution" will reduce the amount of cash I contribute to my IRA. I'm past 59 1/2 so I don't have to worry about the 10% penalty.

This may be somewhat like a person who receives payments from a company, but the company neglects to send a 1099. The person should include the income in their tax filing regardless (check the little box saying no 1099 received). The company will be in trouble if audited. This is a worst case way to view it, but who knows...

I'm still employed and don't want any distributions from my IRA at my current marginal tax rate. I certainly don't want the hassle of dealing with this in 2104 and tax years to come.

My problem is the loss of liquidity of my investment (in financial terms liquidity has value) when LC added this restriction after I invested my funds. I'm stuck with no out for 3 years or until they fix it (if it's fixable). To me it's just flat scary that LC could do this with impunity. Maybe that's why I'm so paranoid.
Title: Re: Folio and IRAs
Post by: GS on January 04, 2014, 04:04:31 PM
I'm pretty sure I'm safe, too, since my IRA is a Roth and I neither would have "withdrew" more than I put in, nor deposited more than I'm allowed.  There is no tax or penalty for withdrawing up to your deposited amount on a Roth, since I've already paid the taxes.  That said, I continue to doubt anything will come of this, as far as the users are concerned, anyway.
Title: Re: Folio and IRAs
Post by: core on January 04, 2014, 04:14:05 PM
So, given my Folio account may not be an IRA then I POSSIBLY "distributed" $752.14 from and "contributed" the same amount to my IRA. If I receive no IRS forms regarding these transactions and unless further clarification is provided I plan to include this in my 2013 tax filing as a precautionary measure.

There's no way in hell I'd do that.  Since you're over the minimum age, I agree that there's really nothing seriously wrong with putting down that $752.14 distribution but it's completely silly and asking for trouble IMHO.  However if you put down the contribution where none really took place then that is a fraudulent return.  Just wait for the forms and put down what they say.  The last thing you want to do is have numbers that don't match what is being reported.  Lending Club is clearly aware of this issue so come February when the forms come out they will have made a decision as to how far they're going to carry this cover-up.  We may even have some answers by then.

Quote
I certainly don't want the hassle of dealing with this in 2104 and tax years to come.

Somehow I don't think you'll have to worry about that.

I'm stuck with no out for 3 years or until they fix it (if it's fixable). To me it's just flat scary that LC could do this with impunity.

Agreed, and it pisses me off.  Changing the rules in the middle of the game. 

As I see it, it's similar to any of these situations:

- Buying a $100 Target gift card and them later adding a restriction saying you can only use it to buy something useless like My Pretty Ponies or only on Saturdays. (equiv: restrictions on selling in-progress notes)
- Buying a $100 gift card at a modest discount and have them "adjust" the value to $75 a month later (equiv: no negative YTM sales)
- $100 gift card redeemable only for $1 per month (this BS)

I wouldn't use the word "impunity" though.  As far as I know nobody has sued them for such things.  Maybe that needs to change.
Title: Re: Folio and IRAs
Post by: Rob L on January 04, 2014, 05:32:36 PM
However if you put down the contribution where none really took place then that is a fraudulent return.  Just wait for the forms and put down what they say.  The last thing you want to do is have numbers that don't match what is being reported.

I didn't make myself clear. I plan to reduce my contribution amount my $752.14, but I would not claim it was contributed. How would I know?
I'm permitted to contribute up to $6,500 but will be sure to contribute $5,747.86 or less in case this nonsense is viewed as a contribution. Wouldn't want to inadvertently exceed the max.

Quote
Lending Club is clearly aware of this issue so come February when the forms come out they will have made a decision as to how far they're going to carry this cover-up.  We may even have some answers by then.

Gee, I hope so but I'm not exactly sure LC has any fiduciary responsibility to me in this matter.
This is what I think I'll do in the absence of additional information.

Somehow I don't think you'll have to worry about that.

You can count on it.
Title: Re: Folio and IRAs
Post by: Rob L on January 04, 2014, 06:26:16 PM
I'm still of the theory that this is just a fee dispute between LC/Folio until further notice.
I recently learned by another thread here that Prosper also does not permit IRA accounts to trade on Folio.
I'm pretty sure I'd read confident statements here on this forum to the contrary, but I don't know if Prosper also changed the rules mid-game.
 If it's a fee dispute then it involves both LC and Prosper.
Title: Re: Folio and IRAs
Post by: core on January 04, 2014, 06:41:24 PM
If it's a fee dispute then it involves both LC and Prosper.

And a fee dispute that only affects IRAs.  If Folio wanted more money they could ask for the whole hog.  I can't believe that Lending Club would put out a message FORBIDDING trading 4+ months ahead of time "just in case the current contract expires without a deal being reached".

Besides, as far as Folio is concered, IRAs are _less_ work, not more.  No 1099's.  No tracking cost basis.  No nothing.  Especially since they do not handle the contributions and distributions.  There is nothing to track!  Nothing is stored there.  Taxable accounts are way more headaches.

And finally, Lending Club is the one that generates all the reports, even for Folio stuff.  Take a look at your two 1099's for last year.  The LC and Folio ones were generated by the same software; they are exactly the same down to the pixel except for the company name.  Folio doesn't have to do anything except collect big fat fees.  More like royalties.  They don't touch a damn thing so let's stop all this talk about how they have to do more "work" for IRAs.  There isn't any freaking work, and even if there was, Lending Club would be the one to do it, not Folio.
Title: Re: Folio and IRAs
Post by: GS on January 04, 2014, 07:19:26 PM
I'm still of the theory that this is just a fee dispute between LC/Folio until further notice.
I recently learned by another thread here that Prosper also does not permit IRA accounts to trade on Folio.
I'm pretty sure I'd read confident statements here on this forum to the contrary, but I don't know if Prosper also changed the rules mid-game.
 If it's a fee dispute then it involves both LC and Prosper.

I don't use Prosper, but a Prosper user says on Page 7 of this thread that they do allow IRA trading on Folio, starting last year.
Title: Re: Folio and IRAs
Post by: Rob L on January 04, 2014, 07:35:32 PM
Yeah, me too. I do not use Prosper and saw what you did in this thread.
More recently however, "All I know is what I read in the papers":
http://www.lendacademy.com/forum/index.php?topic=1902.0 (http://www.lendacademy.com/forum/index.php?topic=1902.0)
Title: Re: Folio and IRAs
Post by: GS on January 04, 2014, 07:57:28 PM
Interesting and informative link, there.  Thanks for posting that.  I don't read the Prosper boards, so I was unaware of that thread, but at least Prosper seems to be communicating with their users what exactly the problem is, and it's that they are seeking clarification if Folio is a "valid IRA trustee by the IRS".  First time I've heard anyone claim a P2P company made that statement, so that does give some validity to the theory.  But if it's true, then at least we know their is a conversation between Folio and the regulators to clear up this matter.
Title: Re: Folio and IRAs
Post by: Rob L on January 04, 2014, 08:51:18 PM
They don't touch a damn thing so let's stop all this talk about how they have to do more "work" for IRAs.  There isn't any freaking work, and even if there was, Lending Club would be the one to do it, not Folio.
Just for the record Senator, I do not, nor have I ever, thought this has anything to do with a fee dispute.
Don't think I ever said more work was involved. Doesn't matter.
Did say Folio might charge more for IRA accounts and/or transactions if/when this mess is resolved. If they can they probably will and I'm over a barrel liquidity-wise.
Wait 3-5 years or pay an extra X bp transaction fee or some annual fee for an IRA compliant Folio account? Maybe I'll have a choice some day.
Again the paranoia...
Title: Re: Folio and IRAs
Post by: core on January 04, 2014, 09:37:24 PM
Don't think I ever said more work was involved.

Naw, I didn't mean to imply that you did.  When I go off on one of my usual multi-paragraph rants it doesn't always have to apply to the original quoted material.

It has just been a common theme:
It could be that Folio wants to cut off IRA accounts because of the additional accounting and paper work burden.
This rings true to me, GS

On the other hand, maybe you did...
More book keeping work will be required of Folio as well as annual distribution of the required IRS forms to investors. Doubtful this will be free; Folio fees may rise for LC IRA investors.

But you're right, it does not matter.  All that matters is the ability for us to trade notes when we want to since that was the agreement when we bought the things. 

And the fact that there's a cover-up going on (regardless of what started all this), perpetrated by a company that is holding on to a lot of our money.  DanB of all people said it best:

Lending Club is a financial services company. They are not a bank that is guaranteed by the government. The ONLY thing LC has going for themselves is "trust".........that is all. Nothing else is worth crap if trust becomes an issue.
Title: Re: Folio and IRAs
Post by: GS on January 04, 2014, 09:42:20 PM
If it's a fee dispute then it involves both LC and Prosper.

....


Besides, as far as Folio is concered, IRAs are _less_ work, not more.  No 1099's.  No tracking cost basis.  No nothing.  Especially since they do not handle the contributions and distributions.  There is nothing to track!  Nothing is stored there.  Taxable accounts are way more headaches.

....


For the most part, couldn't the same be said for other IRA examples, like stocks for example?  You have to track cost basis and dividend distributions in a taxable stock account, but in an IRA account, you only have to track cash in and cash out.  Yet, most online stock brokers give away free taxable investment accounts, but charge a yearly fee for IRAs.  LC gives away free taxable investment accounts, but charges a fee for IRAs, even though, as you said, Taxable accounts are more headaches.   If I had to guess why, it probably has nothing to do with amount of work, and more to do with the cost of bureaucracy of compliance and regulations at the Federal level.
Title: Re: Folio and IRAs
Post by: core on January 04, 2014, 10:00:09 PM
Yet, most online stock brokers give away free taxable investment accounts, but charge a yearly fee for IRAs.

Yes this is certainly true.  If I had to guess at the 'why' though I'd say it had more to do with money than the bureaucracy/compliance because the whole industry is filled with compliance headaches and IRAs are not any more scrutinized nor do they require any additional reporting.  Actually less.  If you don't make any additional contributions or withdrawals then nothing needs to be reported at all as far as I know.

My wild guess as to the 'why' is:  Many people have IRAs containing stocks who never do any other active market investing.  They may sit on the same stable stocks and boring mutual funds their whole lives.  If you're not trading the broker isn't making money.   Taxable accounts are going to have more churn, I would think.  More money.  The fees make up for those passive people.  As for why a minimum commission wouldn't be adequate, well ya got me.  For some brokers it is.

The other answer may be:  "Because it's always been that way".  And because they can get away with it, because that's what everyone else is doing.
Title: Re: Folio and IRAs
Post by: Zach on January 04, 2014, 10:24:22 PM
If it's a fee dispute then it involves both LC and Prosper.

....


Besides, as far as Folio is concered, IRAs are _less_ work, not more.  No 1099's.  No tracking cost basis.  No nothing.  Especially since they do not handle the contributions and distributions.  There is nothing to track!  Nothing is stored there.  Taxable accounts are way more headaches.

....


For the most part, couldn't the same be said for other IRA examples, like stocks for example?  You have to track cost basis and dividend distributions in a taxable stock account, but in an IRA account, you only have to track cash in and cash out.  Yet, most online stock brokers give away free taxable investment accounts, but charge a yearly fee for IRAs.  LC gives away free taxable investment accounts, but charges a fee for IRAs, even though, as you said, Taxable accounts are more headaches.   If I had to guess why, it probably has nothing to do with amount of work, and more to do with the cost of bureaucracy of compliance and regulations at the Federal level.

The primary reason LC and many brokerage firms will charge a fee for IRA/retirement vehicles is that they are required to have an IRA custodian, a 3rd-party company that charges a fee for each account they are the custodian for.
Title: Re: Folio and IRAs
Post by: Zach on January 04, 2014, 10:30:49 PM
Yet, most online stock brokers give away free taxable investment accounts, but charge a yearly fee for IRAs.

My wild guess as to the 'why' is:  Many people have IRAs containing stocks who never do any other active market investing.  They may sit on the same stable stocks and boring mutual funds their whole lives.  If you're not trading the broker isn't making money.   Taxable accounts are going to have more churn, I would think.  More money.  The fees make up for those passive people.  As for why a minimum commission wouldn't be adequate, well ya got me.  For some brokers it is.

While you may be correct, that in some cases, investors will only hold one set of stocks, ETFs, or mutual funds, many investors are very active in tax sheltered accounts. To maximize the growth of your portfolio, it is wise to have some, more profitable trades and higher earnings potentials in your retirement account as (particularly with any Roth account) you're not subject to income tax on the higher earnings when you take distributions from the account.

In addition, if an investor is smarter, they will hold long-term positions (over 1 year) in a taxable account, as those investments are subject to long-term gains taxation (significantly lower than income tax or possible 0% in some cases). This strategy would leave more active investing to a tax-deferred account that actually produces more trading commissions for the broker.
Title: Re: Folio and IRAs
Post by: Rob L on January 05, 2014, 09:32:57 AM
On the other hand, maybe you did...
More book keeping work will be required of Folio as well as annual distribution of the required IRS forms to investors. Doubtful this will be free; Folio fees may rise for LC IRA investors.
Whoops; caught with my posts down. Mia culpa. :-[
Title: Re: Folio and IRAs
Post by: Rob L on January 21, 2014, 08:23:49 PM
My Daddy always told me "If ignorance were bliss you'd be blistered". Case in point. A month or so ago I decided to cease reinvesting principal in my LC IRA account. Haven't bought a note in a long time. Instead, I'd open a taxable account and my liquidity concerns would be history. Folio would be there if I needed cash.

My Grand Daddy said "Up Jumped Santa Claus" when I'd give him the card he needed to Gin. So "What to my wondering eyes did appear but the capital gains loss limitation of $3k per year". Yeah, I was ignorant of LC taxable accounts 101; charge offs have strings attached. If you have an account of maybe $75k or more you will probably exceed $3k per year in charge offs. If you're selling stock with gains the LC charge offs will offset the gains; otherwise anything over $3k is carried over year to year and dies when you do. Well my little Rosana Danna; it's always something.
Title: Re: Folio and IRAs
Post by: viking on January 28, 2014, 05:24:07 AM
If indeed LC/FolioFn now considers FolioFn sales as IRA distributions shouldn't a 1099-R have been generated by now?

Has anyone with an IRA, who sold notes on FolioFn in 2013, received a 2013 distribution form (1099-R)?

BTW, who would be responsible for generating such a 1099-R; LC or FolioFn?
Title: Re: Folio and IRAs
Post by: Rob L on January 28, 2014, 09:22:00 AM
I have not received a 1099-R from anyone as yet.

The LC tax FAQ makes no mention of sending out 1099-R's.

http://kb.lendingclub.com/investor/articles/Investor/What-tax-documents-does-Lending-Club-issue/?l=en_US&fs=Search&pn=1 (http://kb.lendingclub.com/investor/articles/Investor/What-tax-documents-does-Lending-Club-issue/?l=en_US&fs=Search&pn=1)

From that same FAQ:

"Lending Club will provide a Consolidated 1099 Package for individuals, partnerships, and trusts (for trusts established using an individual’s social security number) that hold taxable accounts. Lending Club is not required to and will not provide these forms for corporations, tax-exempt organizations, or for tax-deferred accounts."

I take that to mean no 1099-B's will be issued to IRA account holders by LC. Waiting and watching ...
Title: Re: Folio and IRAs
Post by: viking on January 28, 2014, 01:24:10 PM
I take that to mean no 1099-B's will be issued to IRA account holders by LC. Waiting and watching ...
I don't think that FolioFn could issue those either, assuming that they are are not setup to act as IRA custodians. The only ones that could do this would be the self-directed IRA custodian that handles the LC account (e.g. Self Directed IRA Services, Inc. or CamaPlan). However, since no money is withdrawn from the custodian, a 1099-R should not be generated by them due to FolioFN trading (the custodian don't even have any records of such trades). Thus, I don't see how trading on FolioFn in an LC IRA account could cause any tax consequences?
Title: Re: Folio and IRAs
Post by: Rob L on January 28, 2014, 02:35:36 PM
Thus, I don't see how trading on FolioFn in an LC IRA account could cause any tax consequences?

I think you're right about everything except the wording of the quote above.

My version of the quote would be:
Thus, I don't see how trading on FolioFn in an LC IRA account will result in any reported tax related transactions?

Since money and securities were transferred between my LC IRA account and my FolioFn non-IRA account it seems to me taxable events probably occurred.
I'd like to be very wrong about that. The vast majority (great, I finally worked that one in!) of the discussions on this thread have centered on this point.
However, if we don't receive any forms who's to say for sure there were any tax consequences. Not little old me. All I can do with any certainty is stop trading Folio from my IRA account and that I've done months ago (like the day this thread was started).

I think we agree that it seems likely neither SDIRA, LC nor FolioFn will report anything about these transactions to the IRS nor generate any taxpayer forms.
Still waiting and watching ...

Has anyone (everyone) with regular taxable accounts received their tax forms from LC?
Title: Re: Folio and IRAs
Post by: Rob L on January 28, 2014, 05:54:59 PM
In an interesting coincidence I received an email from SDIRA this afternoon prompting me to go online to my account and get my 4th quarter statement. I did.
Actually, I couldn't find my 4th quarter statement but I was able to access all of my transactions. There were ACH deposits and monthly valuation mark-to-markets, but nothing Folio related (as expected).
Title: Re: Folio and IRAs
Post by: Rob L on January 30, 2014, 10:21:17 PM
I see from another thread here that LC has posted 1099's and, as expected since I'm IRA, nothing.

Then I flipped over to Folio and looked at my "Year End Summary - Notes Sold 2013".
I had looked at this back on 1/20/14 and printed out a copy. The columns at that time were:

   Note Id  Purchase    Purchase    Sales    Sale    Par Value at     Fee
                     Date             Price         Date     Price          Sale

Tonight (1/30/14) there's two additional columns:

   Note Id  Purchase    Purchase    Sales    Sale    Par Value at     Fee    Principal         Interest
                     Date            Price          Date     Price          Sale                        Received        Received

I don't know what to make of this, but the sum total of all my principal received is $2.16 and interest received is $2.27.
Guess I'll just file this away with my tax records and forget about it.

Title: Re: Folio and IRAs
Post by: yojoakak on January 30, 2014, 11:06:54 PM
Tonight (1/30/14) there's two additional columns:

   Note Id  Purchase    Purchase    Sales    Sale    Par Value at   Fee    Principal         Interest
                  Date           Price       Date     Price       Sale                   Received        Received


I see they've also added these columns to prior years. Will wonders never cease!
Title: IRA Accounts and Selling Notes
Post by: twigster on March 11, 2014, 02:31:33 AM
I  was informed that Notes can't be sold (or bought) via Folio with a Lending Club  IRA account.  How about Prosper.... can notes be sold (or bought) via Folio with an IRA account? 
Title: Re: IRA Accounts and Selling Notes
Post by: Bohb Daishi on March 11, 2014, 02:54:26 AM
I  was informed that Notes can't be sold (or bought) via Folio with a Lending Club  IRA account.  How about Prosper.... can notes be sold (or bought) via Folio with an IRA account?

That's what they tell us all, but yet they keep approving applications for IRA's on Folio. Just do it anyway, they won't stop you.
Title: Re: IRA Accounts and Selling Notes
Post by: core on March 11, 2014, 02:55:59 AM
I  was informed that Notes can't be sold (or bought) via Folio with a Lending Club  IRA account.

Not correct. What they should have said was that you must not use Folio from an IRA.  You can have a fit of selective memory and trade anyway.  They know you can too.  It's a big joke and they're laughing as they tell you the story.

As for Prosper, as I recall there were some issues with signup that were extant but fixed.  If you can get in, sure, sign up.  But you will quickly find that Prosper is lame and not suitable for any reasonable person.
Title: Re: IRA Accounts and Selling Notes
Post by: ggnoob1337 on March 11, 2014, 10:39:38 AM
I  was informed that Notes can't be sold (or bought) via Folio with a Lending Club  IRA account.  How about Prosper.... can notes be sold (or bought) via Folio with an IRA account?

I've been selling notes in my IRA accounts. They let me, so why not?
Title: Re: Folio and IRAs
Post by: NorseBoric on March 11, 2014, 09:10:28 PM
I read this entire thread but I don't think I'm any more informed. Is there still yet no resolution on whether selling notes from an IRA account on Fiolio is a no-no in the eyes of the IRS?
Title: Re: Folio and IRAs
Post by: Boatguy on March 11, 2014, 09:24:22 PM
The money never leaves your IRA so why would the IRS care?  It's no different than having an IRA at a brokerage and buying or selling a stock, the proceeds/profits/losses stay in the IRA.  It's only a taxable event when the proceeds leave the IRA.

Foliofn is just a broker, not a custodian.

I populated my IRA almost entirely from Foliofn last year (i.e., transferred in cash from another IRA and bought notes on Folio) and have not seen any negative consequences.
Title: Re: Folio and IRAs
Post by: Rob L on March 11, 2014, 09:40:44 PM
Yes, that seems to be correct. We just don't know.
All we know for sure is that LC has posted notices on its web site prohibiting IRA accounts from buying and/or selling notes on Folio.
We also know LC permits these transactions to occur. Maybe it's like a traffic light. When it's red you can still step out in front of that bus if you chose.

The only thing I might add is that Peter recently mentioned he had asked LC about this and not yet gotten an answer. Maybe real soon now.
It's not LC hasn't known for months this question is hanging out there. This thread has been one of the most read and responded in the history of LA.
You should know since you just read it all.

See the comments to the following blog post:

http://www.lendacademy.com/orchard-p2p-and-online-lending-ecosystem/ (http://www.lendacademy.com/orchard-p2p-and-online-lending-ecosystem/)
Title: Re: IRA Accounts and Selling Notes
Post by: PennySaved on March 11, 2014, 11:09:37 PM
There was a lot of discussion before on why selling notes from your IRA lending club account might be a problem.  Could be viewed as a taxable distribution.  Status of Folio as an IRA custodian is not clear.  See this thread.

http://www.lendacademy.com/forum/index.php?topic=1674.0
Title: Re: IRA Accounts and Selling Notes
Post by: twigster on March 11, 2014, 11:29:43 PM
I am in the process of opening a ROTH IRA account at Lending Club. 

Here is the reply from the application form:
Quote
Thank you for submitting your IRA application.

Your paperwork to set up your Lending Club IRA has been received and forwarded to our Custodian, SD IRA Services.

You can expect an email notifying you when your funds are available in your Lending Club account. The process may take 7 to 10 business days, or a little longer (15-20 business days) if your funds are coming from a third party, such as a transfer from your present custodian. You will be contacted by Lending Club or SDIRA should any further information be needed.

Please note that individual retirement accounts (IRA) may not participate in the Note Trading Platform, which means that you will not be able to purchase or sell Notes on the secondary market. Lending Club Notes purchased through an IRA must be held through maturity.

Please feel free to reach out to us with any additional questions.

I was also told on the phone previously I would not be able to trade notes on the Note Trading Platform. 

I wonder if this is something new, as it seems everyone else can still trade notes?
Title: Re: IRA Accounts and Selling Notes
Post by: twigster on March 11, 2014, 11:35:25 PM
Quote
There was a lot of discussion before on why selling notes from your IRA lending club account might be a problem.  Could be viewed as a taxable distribution.  Status of Folio as an IRA custodian is not clear.  See this thread.

http://www.lendacademy.com/forum/index.php?topic=1674.0

Thanks for the link, I didn't see that before.  Seems like this discussion of whether you can or can't has been going on for a while.  While the rules say you can't do it apparently in practice you can.  When my account gets set up I will apply for a associated Folio and see if I can trade in it.

Thanks for all the inputs!!!
Title: Re: Folio and IRAs
Post by: Zach on March 12, 2014, 12:58:48 AM
The money never leaves your IRA so why would the IRS care?  It's no different than having an IRA at a brokerage and buying or selling a stock, the proceeds/profits/losses stay in the IRA.  It's only a taxable event when the proceeds leave the IRA.

Foliofn is just a broker, not a custodian.

I populated my IRA almost entirely from Foliofn last year (i.e., transferred in cash from another IRA and bought notes on Folio) and have not seen any negative consequences.

The reason it can cause problems is because buyers/sellers determine a market price for their notes, and you could theoretically sell notes worth hundreds or thousands of dollars from a taxable account to your IRA for $0.01. While this is blatant tax evasion, I think LC would be wise to restrict IRAs to no trading, unless market prices become determined by LC in the future.
Title: Re: IRA Accounts and Selling Notes
Post by: twigster on March 12, 2014, 01:18:10 AM
Just in case anyone stumbles on this thread I would refer you to the following recent replies on another similar thread that is tracking this.

http://www.lendacademy.com/forum/index.php?topic=1674.165 (http://www.lendacademy.com/forum/index.php?topic=1674.165)

Quote
All we know for sure is that LC has posted notices on its web site prohibiting IRA accounts from buying and/or selling notes on Folio.
We also know LC permits these transactions to occur. Maybe it's like a traffic light. When it's red you can still step out in front of that bus if you chose.

The only thing I might add is that Peter recently mentioned he had asked LC about this and not yet gotten an answer. Maybe real soon now.
It's not LC hasn't known for months this question is hanging out there. This thread has been one of the most read and responded in the history of LA.
You should know since you just read it all.

Quote
The reason it can cause problems is because buyers/sellers determine a market price for their notes, and you could theoretically sell notes worth hundreds or thousands of dollars from a taxable account to your IRA for $0.01. While this is blatant tax evasion, I think LC would be wise to restrict IRAs to no trading, unless market prices become determined by LC in the future.
Title: Re: Folio and IRAs
Post by: Rob L on March 12, 2014, 02:23:42 AM
The reason it can cause problems is because buyers/sellers determine a market price for their notes, and you could theoretically sell notes worth hundreds or thousands of dollars from a taxable account to your IRA for $0.01. While this is blatant tax evasion, I think LC would be wise to restrict IRAs to no trading, unless market prices become determined by LC in the future.

You are certainly right, but I hope there's more to it than that. There are already many examples of transactions that  the tax code requires to be at fair market value
 If challenged the tax payer must substantiate the value used or face the consequences.

I think the tax code, IRS and the Federal prison system already have this one covered without LC's help. As you said it's an obvious fraud.
Title: Re: Folio and IRAs
Post by: Keltset on March 12, 2014, 12:33:40 PM
I wonder what the odds are even of being able to transfer notes like this without them being intercepted by a scripter and seeing major losses....
Title: Re: Folio and IRAs
Post by: core on March 12, 2014, 12:43:25 PM
I wonder what the odds are even of being able to transfer notes like this without them being intercepted by a scripter and seeing major losses....

Manually, you're almost certain to lose them.  But if you use automation and the proper approach, it would be almost foolproof.  Hint:  You already know what the order_id will be ahead of time.  Other people don't.  I think the greatest risk would come from a temporary network outage/hiccup on your end.
Title: Re: Folio and IRAs
Post by: Rob L on March 12, 2014, 01:56:38 PM
I wonder what the odds are even of being able to transfer notes like this without them being intercepted by a scripter and seeing major losses....

Manually, you're almost certain to lose them.  But if you use automation and the proper approach, it would be almost foolproof.  Hint:  You already know what the order_id will be ahead of time.  Other people don't.  I think the greatest risk would come from a temporary network outage/hiccup on your end.

I had also thought the same thing but didn't mention it since my posts are too long winded as it is.
If core is correct, and he appears to have a rudimentary understanding of the Folio market, then a fraudster if caught would have to explain not only fair market value manipulation, but also the use of automated tool(s) created for the sole purpose of implementing the fraud.
Title: Re: Folio and IRAs
Post by: Boatguy on March 12, 2014, 04:18:21 PM
There are many ways to commit tax evasion and this thread has veered into one of the more obscure.

Let's assume a more benign situation where you just want to trade notes in your IRA, like you can trades stocks, ETFs, bonds, etc.  Where's the harm/foul?
Title: Re: Folio and IRAs
Post by: Rob L on March 12, 2014, 05:29:47 PM
There are many ways to commit tax evasion and this thread has veered into one of the more obscure.

Let's assume a more benign situation where you just want to trade notes in your IRA, like you can trades stocks, ETFs, bonds, etc.  Where's the harm/foul?

Couldn't agree more. And until around July last year that was the case (or LC became aware it was not the case at that time).
There was no mention of Folio prohibition during the period I purchased the bulk of my notes in my IRA account (pre-July '13).
Then, for reasons unknown, LC began posting "thy shalt not" on it's web site while doing absolutely nothing to enforce the commandment.
My guess, posted on more than one occasion, is that my Folio account isn't an IRA.
Transfers of notes and money to/from it are taxable events no different than transferring same to/from my personal checking account.
When one looks at their Folio monthly statement it explicitly describes the flow of notes and money between your LC account and your Folio account.
This is a big can of worms that hasn't gone away, though I hope LC and Folio are working together to make it happen.
Who knows when; I was told this isn't a big priority for LC.
Title: Re: Folio and IRAs
Post by: Keltset on March 13, 2014, 10:14:39 AM
Does Folio even hold cash or notes? I thought they only acted as a "broker" of them... This is an area I'm not well educated on but if that's the case wouldn't the loans never technically be leaving the lending club accounts? (Note in LC Act A is matched to a buyer LC Act B and "Lending Club" is notified by "Folio" that a transaction has settled and to move the note from LC Act A to LC Act B) I have real estate in an IRA and I can't help but associate what Folio does here is nothing more than what a real estate agent would be doing (facilitating in the transfer but never taking possession).

If that's the case, then folio wouldn't need to be IRA and it should hold no relevance. We all know the Folio isn't Folio anyway and that it's really LC. I guess I just don't understand the liability/legal issue here other than saying they said not to allows them to walk from any liability of  fraudulent activity by the investors.
Title: Re: Folio and IRAs
Post by: core on March 13, 2014, 10:24:20 AM
Keltset-  Folio does not "hold" cash or notes according to the site.  You see this message every time you log in.  But take a look at your statements and you can see that they are going out of their way to make the point that cash is being "transferred" to your "Folio account".  Why this is, I have no idea.  They went through a lot of trouble to give this appearance so logic dictates there must have been a reason from the beginning.
Title: Re: Folio and IRAs
Post by: GS on March 13, 2014, 04:09:41 PM
Someone pointed out that LC apparently does not have a securities brokerage license.  I assume that's why they have to make it clear that  Folio is handling the trades, it also appears to be the "catch".  LC can't claim the money and notes are staying within the IRAs for tax purposes, while also claiming the money and notes are being transferred in and out of IRA accounts for SEC compliance purposes ... I guess.

It's kinda frustrating that I have to guess ...
Title: Re: Folio and IRAs
Post by: NorseBoric on March 13, 2014, 06:34:19 PM
Okay, it makes sense to me that your Folio account is not an IRA. Selling a note is therefore equivalent to withdrawing money and putting money back in?
Title: Re: Folio and IRAs
Post by: Rob L on March 13, 2014, 06:41:37 PM
It's kinda frustrating that I have to guess ...

Yes it is frustrating, but that does sound like a very good guess.
I do wonder how it will turn out in the end, and whether it will be definitively resolved before IPO time.
Title: Re: Folio and IRAs
Post by: yojoakak on March 13, 2014, 07:42:41 PM
equivalent to withdrawing money and putting money back in?

If you withdraw money from an IRA you have 60 days to redeposit it. So redepositing it a few seconds later should be no problem, right?
Title: Re: Folio and IRAs
Post by: RaymondG on March 13, 2014, 10:53:47 PM
But the amount *withdrawed* is likely not equal to what will be redeposited back after the sale/purchase.
Title: Re: Folio and IRAs
Post by: yojoakak on March 13, 2014, 11:08:23 PM
But the amount *withdrawed* is likely not equal to what was redeposited back after the sale/purchase.

Oh I see.

So like if my IRA uses $2,000 to purchase a platinum coin with a face value of $100 then I'll get dinged for a $1,900 "withdrawal".

Interesting! I did not know that.

Thanks!
Title: Re: Folio and IRAs
Post by: Rob L on March 13, 2014, 11:55:13 PM
It appears that if you take an asset out you have 60 days to put it back or put into another IRA. However, from the IRS pub 590 guidelines:

Quote
The same property must be rolled over.   If property is distributed to you from an IRA and you complete the rollover by contributing property to an IRA, your rollover is tax free only if the property you contribute is the same property that was distributed to you.

Complicated, but I think this is on point. Note out  / cash in (or the reverse) doesn't seem to cut it.

It also appears that you could only do this once a year for any single traditional IRA (if it were permitted in the first place).

Quote
Waiting period between rollovers.   Generally, if you make a tax-free rollover of any part of a distribution from a traditional IRA, you cannot, within a 1-year period, make a tax-free rollover of any later distribution from that same IRA. You also cannot make a tax-free rollover of any amount distributed, within the same 1-year period, from the IRA into which you made the tax-free rollover.

I dunno, maybe I'm talking apples and oranges. I'm an engineer, not an accountant. Still just guessing.
Title: Re: Folio and IRAs
Post by: core on March 14, 2014, 12:13:09 AM
It appears that if you take an asset out you have 60 days to put it back or put into another IRA.

If you're going to go down that road, then you would need to have documented all of that on your tax return.  You cannot just quietly redeposit in another IRA within 60 days; that is not enough.  Also there's that pesky 20% withholding requirement that applies when it is not a trustee-to-trustee transfer.
Title: Re: Folio and IRAs
Post by: Boatguy on March 14, 2014, 05:54:15 PM
But the amount *withdrawed* is likely not equal to what was redeposited back after the sale/purchase.

Oh I see.

So like if my IRA uses $2,000 to purchase a platinum coin with a face value of $100 then I'll get dinged for a $1,900 "withdrawal".

Interesting! I did not know that.

Thanks!

I don't think so.  Buying at bond at a premium (e.g., $105K for $100K face value) is not a taxable event.
Title: Re: Folio and IRAs
Post by: GS on March 14, 2014, 09:03:39 PM
I don't think it has to be a trustee to trustee direct transfer.  I was just reading an article that said you are legally allowed to "loan" yourself IRA money for up to 60 days, for any purpose, as long as you put back into an IRA before the 60 days is up.  I don't think that was the intent for the 60 day grace period, but apparently it's a legal way to give yourself a "bridge" loan.  I wouldn't want to try it, though. 

One of the real limiting factors is that you can only roll over an IRA once every 12 months, so I guess that means you can't trade more than your account value ... in theory.  There are plenty of ways to play this if the IRS wants it's pound of flesh.  I used a Roth IRA and legally I'm allowed to withdraw up to want I put in without penalty or interest, so there is that angle, as well.

I don't think anything will come of this, tax wise.  Tax year 2013 is upon us and Folio is not sending me any IRA distribution filings ... seems like it was now or never.
Title: Re: Folio and IRAs
Post by: Rob L on March 15, 2014, 12:25:32 PM
I used a Roth IRA and legally I'm allowed to withdraw up to want I put in without penalty or interest, so there is that angle, as well.
Yes, and I don't think that point has been made strongly enough.
The main problem is with traditional IRA's.
Likely most folks who traded Folio from their Roth IRA did not exceed the total amount of their contribution(s).
If they didn't I can't see a problem either. If they did, well that's a different matter.
Title: Re: Folio and IRAs
Post by: RaymondG on March 16, 2014, 05:05:15 PM
I used a Roth IRA and legally I'm allowed to withdraw up to want I put in without penalty or interest, so there is that angle, as well.
Yes, and I don't think that point has been made strongly enough.
The main problem is with traditional IRA's.
Likely most folks who traded Folio from their Roth IRA did not exceed the total amount of their contribution(s).
If they didn't I can't see a problem either. If they did, well that's a different matter.

For Roth IRA, though what we put in is allowed to withdraw, it's very likely not allowed to move it back after withdrawal and not be treated as new contribution.
Title: Re: Folio and IRAs
Post by: Rob L on March 16, 2014, 06:29:12 PM
For Roth IRA, though what we put in is allowed to withdraw, it's very likely not allowed to move it back after withdrawal and not be treated as new contribution.

Very good; that's one good reason I shouldn't post on something I know little about. I hadn't thought of that.
Mine is all traditional IRA so I'm hosed anyway. Maybe the Roth's are too.
Title: Re: Folio and IRAs
Post by: core on March 16, 2014, 06:42:32 PM
I don't think anything will come of this, tax wise.  Tax year 2013 is upon us and Folio is not sending me any IRA distribution filings ... seems like it was now or never.

Lending Club is not going to just send out tax documents in a big envelope labeled "Surprise!".  They will eventually get their legal ducks in a row.  Even after that happens, Lending Club will likely not say anything about previous years; they will just hope things slide by quietly.  Unless the IRS gets real interested in technicalities (to what end?) and starts asking questions, LC has no motivation to say anything which would be a PR nightmare.
Title: Re: Folio and IRAs
Post by: lender_john on March 17, 2014, 10:47:37 AM

I'm waiting for them to 'get their ducks in a row'.. while my IRA return keeps going down and down since I can't (or shouldn't) reinvest anything. 
With the current mess I'd be perfectly happy to sell my IRA portfolio and transfer to another investment.. Of course I can't (or shouldn't) do that either.
Title: Folio and IRAs
Post by: BruiserB on March 17, 2014, 08:21:23 PM
I'm quite pleased with my returns in my IRA account and have no issue continuing to reinvest.  I would like them to get these Folio issues clarified though as I think it would be an advantage to be able to trade in Folio and also it would be an effective way to liquidate if/when it comes time to take a distribution or roll over to a different investment.  Having to wait until all loans pay back to do so seems ridiculous.  It doesn't seem as though it is a real issue to use Folio, but I am refraining from doing so till the doubt is removed. 

It is important to remember that Self Directed IRA Services is technically the custodian of our IRA accounts, so I find it hard to believe a transfer of funds/securities between LC and Folio could be considered a withdrawal or distribution. A distribution would have to come through SD IRA Services. I can understand the concerns about the potential to buy/sell notes with yourself and/or some related 3rd party, but that's just blatantly illegal and it would be stupid to do this. 


Sent from my iPad using Tapatalk
Title: Re: Folio and IRAs
Post by: lender_john on March 17, 2014, 10:44:41 PM
Unfortunately since I'm in a folio-only state, the only way to reinvest is through Folio.
Title: Re: IRA Accounts and Selling Notes
Post by: twigster on April 08, 2014, 10:12:54 AM
I have applied for a Folio account with my newly set up Roth IRA and it all processed OK and then said wait 4 business days.  That was a while ago and it is still in the same status so I called LC and the lady said that Folios are no longer allowed for IRA accounts.

If anyone is successful in getting a Folio open with an IRA after this can you let me know (or if you have any other info)?  It seems very odd (which I pointed out to the girl on the phone) that the system would allow you to apply for the folio and it just gets hung up and never goes though.  She implied there may eventually be a time when it is allowed (again) but could not give any kind of time estimate.
Title: Re: IRA Accounts and Selling Notes
Post by: core on April 08, 2014, 10:36:26 AM
Twigster I took some time to read back and this link has already been given to you and ack'd.

http://www.lendacademy.com/forum/index.php?topic=1674.0

The LC folks will say what ever it is that they want to say. 
Title: Re: Folio and IRAs
Post by: yojoakak on April 08, 2014, 12:28:54 PM
The reason it can cause problems is because buyers/sellers determine a market price for their notes, and you could theoretically sell notes worth hundreds or thousands of dollars from a taxable account to your IRA for $0.01. While this is blatant tax evasion, I think LC would be wise to restrict IRAs to no trading, unless market prices become determined by LC in the future.

That can happen ANYWHERE, not just at LendingClub.

"Moondra typically executed his wash sales in the after-hours market (defined herein as the period between the regular market's 4:00 p.m. close and the 9:30 a.m. opening the next day), and at prices away from the prevailing market price...

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
Title: Re: Folio and IRAs
Post by: core on April 08, 2014, 04:16:57 PM
Put most of these tax fraudster arguments away.  I can claim billions in losses in options and futures and nobody is the wiser.  Investment taxes, like most taxes, still mostly on the honor system.  Basis reporting on stocks just since 2012?  Yeah, IRS sees tiny fraud opportunity in p2p and goes after it while ignoring 99.997% of the rest of fraud.  Makes friggin sense to me.  Try again.
Title: Folio and IRAs
Post by: BruiserB on April 08, 2014, 09:45:38 PM
Put most of these tax fraudster arguments away.  I can claim billions in losses in options and futures and nobody is the wiser.  Investment taxes, like most taxes, still mostly on the honor system.  Basis reporting on stocks just since 2012?  Yeah, IRS sees tiny fraud opportunity in p2p and goes after it while ignoring 99.997% of the rest of fraud.  Makes friggin sense to me.  Try again.

It doesn't necessarily mean the IRS told LendingClub that they couldn't allow Folio access because of the potential for self dealing.  It could just be that LendingClub saw the potential for it and decided to disallow it in their own judgement.  There's nothing that prohibits a company from having more conservative rules than the law would allow.  Maybe LC decided they don't need the potential bad press that could come from someone's tax cheating before their IPO?  I'm not saying that is the case but it could be.

I don't see any other explanation.....it obviously isn't expressly prohibited, or those who have traded in Folio would have ended up in hot water.....but it doesn't seem that anyone has.  It feels like LC is just being extra conservative, which probably isn't a bad idea for them at this point.


Sent from my iPad using Tapatalk
Title: Re: Folio and IRAs
Post by: core on April 09, 2014, 01:01:24 AM
Maybe LC decided they don't need the potential bad press that could come from someone's tax cheating before their IPO?

That's a possibility.  But how is that issue solved by very quietly prohibiting it and not enforcing anything?  How would this newspaper headline look right before the IPO:  Lending Club makes possible biggest tax cheat in decades -- User agreement says not to do it  That doesn't make them look any better, does it?

Regarding self-dealing in general... It's rather easy to do "accidentally", since LC doesn't show you seller names.  It might be one of your other accounts.  Maybe you didn't even post the listing (IR auto sell).

As far as I know, legally there's nothing wrong with self-dealing as long as the price is fair.  And who is to decide what's a "fair" price?  Not LC or the IRS.  If it was easy to calculate then prices would be tighter.  It's not all that easy.  Maybe $1 seems like a fair price to me.  Yeah that's the ticket.  They'd have quite the battle on their hands trying to prove otherwise beyond a doubt.  I have data showing that people have sold on-time notes for -99% before.  You might call it seller mistake but prove it.  Those past sales would boost my argument that it's not all that unusual.  I wouldn't want to be sitting in the defendant's chair though.
Title: Re: IRA Accounts and Selling Notes
Post by: twigster on April 09, 2014, 09:36:44 AM
Sorry about posting it in the wrong spot!
Title: Re: IRA Accounts and Selling Notes
Post by: Rob L on April 09, 2014, 09:46:42 AM
Hey Zach, how about moving this thread's posts to http://www.lendacademy.com/forum/index.php?topic=1674.0 (http://www.lendacademy.com/forum/index.php?topic=1674.0)?
Keeps everything in one place and there is some recent interesting info here.
Title: Re: IRA Accounts and Selling Notes
Post by: Zach on April 09, 2014, 10:24:14 AM
Hey Zach, how about moving this thread's posts to http://www.lendacademy.com/forum/index.php?topic=1674.0 (http://www.lendacademy.com/forum/index.php?topic=1674.0)?
Keeps everything in one place and there is some recent interesting info here.

Done.
Title: Re: Folio and IRAs
Post by: twigster on April 09, 2014, 10:38:35 AM
I just got off the phone with Lending Club again.  This time the guy was more explanatory than the gal I spoke to previously.  He said they were aware of the problem and were working on a fix to allow trading in notes from the IRA accounts.  He said it may be complete within a matter of months but could not give an exact date! 
Title: Re: Folio and IRAs
Post by: lender_john on April 09, 2014, 10:49:58 AM
I just got off the phone with Lending Club again.  This time the guy was more explanatory than the gal I spoke to previously.  He said they were aware of the problem and were working on a fix to allow trading in notes from the IRA accounts.  He said it may be complete within a matter of months but could not give an exact date!

Of course this sounds exactly like what they told me a few months ago... so it should be taken with a very large grain of salt.

Without reinvesting and selling late notes, my IRA is starting to lose money...  :-[
Title: Re: Folio and IRAs
Post by: thezfunk on April 09, 2014, 10:59:58 AM
I just got off the phone with Lending Club again.  This time the guy was more explanatory than the gal I spoke to previously.  He said they were aware of the problem and were working on a fix to allow trading in notes from the IRA accounts.  He said it may be complete within a matter of months but could not give an exact date!

Of course this sounds exactly like what they told me a few months ago... so it should be taken with a very large grain of salt.

Without reinvesting and selling late notes, my IRA is starting to lose money...  :-[

You mean your returns are dropping or do you actually have negative returns?  Big difference.
Title: Re: Folio and IRAs
Post by: lender_john on April 09, 2014, 02:44:00 PM
I just got off the phone with Lending Club again.  This time the guy was more explanatory than the gal I spoke to previously.  He said they were aware of the problem and were working on a fix to allow trading in notes from the IRA accounts.  He said it may be complete within a matter of months but could not give an exact date!

Of course this sounds exactly like what they told me a few months ago... so it should be taken with a very large grain of salt.

Without reinvesting and selling late notes, my IRA is starting to lose money...  :-[

You mean your returns are dropping or do you actually have negative returns?  Big difference.

Negative in the short term, decreasing overall.
Title: Re: Folio and IRAs
Post by: Boatguy on April 10, 2014, 08:38:02 PM
I just got off the phone with Lending Club again.  This time the guy was more explanatory than the gal I spoke to previously.  He said they were aware of the problem and were working on a fix to allow trading in notes from the IRA accounts.  He said it may be complete within a matter of months but could not give an exact date!

Makes no sense to me.  I've sold notes in both my IRA and my wife's IRA as recently as 3 days ago.
Title: Re: Folio and IRAs
Post by: core on April 10, 2014, 10:08:29 PM
Makes no sense to me.  I've sold notes in both my IRA and my wife's IRA as recently as 3 days ago.

Yes, everyone "can", if they are willing to ignore the restriction, press the buttons, and face any possible future consequences.  I think all parties involved know this.  I took twigster's post to mean that LC claimed to be working on a "fix" meaning working on a way that they can remove that language from the investor agreement and work out whatever legal issues are the cause of this whole mess.

But they have been saying this since day 1 and nothing has happened with it, so I wouldn't trust anything they say.  Reminds me of The Money Pit... How long until the house is done?  "Two weeks" is always the answer, with a chuckle.
Title: Re: Folio and IRAs
Post by: twigster on April 14, 2014, 05:35:28 AM
Quote
I took twigster's post to mean that LC claimed to be working on a "fix" meaning working on a way that they can remove that language from the investor agreement and work out whatever legal issues are the cause of this whole mess.
Actually what happened to me is that when I applied for a folio account I was able to apply for it but then there was a screen message saying account was in the process of being approved, please wait 4 business days (the standard message, same one I got with my personal account).  It took longer than 4 business days to approve.  When I called LC (because of the long delay in approving the account) they said it would not be approved because of it being associated with an IRA (called twice, told the same thing both times).  After a while though it was finally approved automatically and seems to be working.

However, agree it would be nice for them to work out whatever issues they are working on!  The second guy did state that they were working on a permanent solution, maybe the have resolved the issue, explaining the delay in account approval and then it finally being approved? 
Title: Re: Folio and IRAs
Post by: Rob L on April 14, 2014, 08:54:41 AM
Nothing seems to have changed. All the "thy shalt not" messages regarding IRA accounts and Folio trading are still present on the LC web site.
Title: Re: Folio and IRAs
Post by: Kowser on April 15, 2014, 01:03:28 AM
Well that's a shame. Here I was thinking I would sell notes from my IRA to my regular account for absurd markups and fund my tax-free IRA that way. Not to mention the tax write off on the losing side making such bad investment decisions. Shucks!  ;D
Title: Re: Folio and IRAs
Post by: ggnoob1337 on April 15, 2014, 02:24:45 PM
Well that's a shame. Here I was thinking I would sell notes from my IRA to my regular account for absurd markups and fund my tax-free IRA that way. Not to mention the tax write off on the losing side making such bad investment decisions. Shucks!  ;D

That sounds like a good idea...hmm...

lol
Title: Re: Folio and IRAs
Post by: core on April 15, 2014, 03:15:22 PM
Yes it was a "good idea" years ago before people were blabbing about it.  Now you would be rather foolish to openly do anything like this if both accounts are tied to you personally.

If you're going to try it, it's best to find an unrelated third party's account to use for a short time.  The safest thing to do is "borrow" someone's identity who is not involved with LC and create a fresh account that you retain control of.  That way your friend can't change his/her mind in the middle of the operation and decide to keep the temporary profits.  As for legal sources of throwaway identities, I find cocktail waitresses are good for these types of schemes as the girls are often game for an extra $100 here and there, and you can snag a high-resolution copy of their ID right there over drinks.  The waitresses are of course good for other things too.
Title: Re: Folio and IRAs
Post by: yojoakak on April 16, 2014, 04:52:10 PM
Well that's a shame. Here I was thinking I would sell notes from my IRA to my regular account for absurd markups and fund my tax-free IRA that way. Not to mention the tax write off on the losing side making such bad investment decisions. Shucks!  ;D

That sounds like a good idea...hmm...

lol

They worst they'd probably do is make you stop and pay (some of) it back. I'm not even sure they'd give you a fine.

"Respondent Moondra employed a fraudulent trading scheme designed to create artificial tax losses by executing wash sales between taxable and tax-sheltered accounts. 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."
https://www.sec.gov/litigation/admin/34-48432.htm