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Messages - jpildis

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Investors - LC / Re: Okay! Where did the Checks Go?
« on: April 04, 2013, 12:33:55 PM »
LendingClub revises history almost as much as the Bush Administration did.

Come on... can this be a politics free zone?

Investors - LC / Re: How much of your portfolio goes to P2P lending?
« on: April 02, 2013, 09:42:00 AM »
20% of my non-RE net worth.  I'm 43 and have 'been around the block' with investing.  I invested in the early days of Prosper (2006-2007) and I've seen how bad it can get.  I didn't have any analytic resources and I simply chased return.  When it was all over, I lost a whopping 1% of my investment... much better than all of the 'safe' blue-chip financials I owned in 2007.

For me, the real risk is the company risk and the unknown result of a Prosper of LC bankruptcy.  Now that LC is thriving, I'm focused on their platform going forward.  Prosper, in my opinion, is a slowly sinking ship.  Best case, they get bought by Prosper... worst case, we get to experience was a bankruptcy remote vehicle really is.

Investors - LC / Re: Peter's Tax Post
« on: March 09, 2013, 10:10:45 AM »
As much as I would like to use Section 166 to turn my long term defaults into short-term losses, the statute clearly states that this rule does not apply to securities as defined by 165(g)(2)(C):

For purposes of this subsection, the term “security” means—
(A) a share of stock in a corporation;
(B) a right to subscribe for, or to receive, a share of stock in a corporation; or
(C) a bond, debenture, note, or certificate, or other evidence of indebtedness, issued by a corporation or by a government or political subdivision thereof, with interest coupons or in registered form.

Based on this, I think it's clear LC & Prosper notes are securities.


The other reason, and this is really a big issue, is that I don't think that people are including the OID they pay tax on in their adjusted basis of the note.  If you just deduct your cost basis on a chargeoff, and don't include OID, then you aren't taking into account that you should recover that tax that you already paid.  Put more plainly, if you don't adjust your basis to take account of the OID you accrued, you won't deduct enough on a chargeoff.

Can you explain the point a bit further?  Do I not just use the cost basis reported by Prosper/LC?

So I've pulled together the numbers for my 2012 taxes and it's not pretty...

Gross Return: 16%

Defaults: 6.9%

Net Return: 9.1% - I'm happy with this considering I've dramatically improved my loan selection and all of the defaults are from 2011 vintage loans

Net Return After Federal Tax: 4.9% - This sucks... my all in tax rate for p2p is 46.5%!!!

I'm getting killed by the difference between the LT Capital Loss taxation and my marginal income taxation.  This is a major issue with investing in the higher-yield loans in a taxable account.  I'm going to have to start selling my distressed loans within a year of purchase to ensure I don't get bitten next year.

I'm sure this has been discussed before, but I would like everyone's thoughts...

I have a significant amount in both Prosper and LC and, after reviewing my 2012 tax forms, I see that I have $10k+ of long-term capital losses.  This is fine as my income far exceeds that number but the difference in taxation is concerning.  My marginal tax rate is 33% so I'm looking at a 15% (factoring in the 2.9% medicare tax on wages) tax difference between my P2P interest and my P2P LT capital losses.

An extra $1500 of tax isn't the end of the world but it's enough to make me really think about whether I should organize my P2P as a schedule c business.

Investors - P / Tax Forms Jacked-Up
« on: February 01, 2013, 09:21:49 AM »
I just downloaded my and my wife's Prosper 1099s from Prosper and they are wrong... both have bogus entries in the charge-off sections that hugely inflate our losses.  Each 1099 had an extra entry that showed a single-loan loss that exceeds $4,000. 

Prosper is out of control.  Between this and the payment-posting delay last month, I'm getting a bad feeling about this operation.  Two very visible system/accounting issues is only the 'smoke' we can see... my fear is the extent of the fire we cannot see.

Investors - LC / Taxes - say goodbye to the small note exemption
« on: January 19, 2013, 12:26:43 PM »
Just spoke with my LC rep and she informed me that LC's tax documents will be similar to Prosper's... one consolidated 1099 for all loans combined.  I'm thankful I'm not going to have to mess with multiple 1099s this year and I'm wondering how many lenders have been underfiling prior to this year.

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