Folio and IRAs

[Zach]

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.

[Cries]

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?

[Rob L]

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.

[GS]

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. 

[Rob L]

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)?

[core]

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.

[bobeubanks]

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?

[DanB]

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? 

[core]

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.

[DanB]

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.

[cnmor54]

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.

[core]

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.

[lcdude]

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.

[Rob L]

Welcome to the LA forum Icdude.

[DanB]

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.