Author Topic: Folio and IRAs  (Read 111418 times)

JDowding

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Re: Folio and IRAs
« Reply #15 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.

Vlad

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Re: Folio and IRAs
« Reply #16 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.

ggnoob1337

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Re: Folio and IRAs
« Reply #17 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.

pplinvestor

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Re: Folio and IRAs
« Reply #18 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.

yojoakak

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Re: Folio and IRAs
« Reply #19 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.
« Last Edit: October 16, 2013, 10:30:40 AM by yojoakak »

lender_john

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Re: Folio and IRAs
« Reply #20 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.

Rob L

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Re: Folio and IRAs
« Reply #21 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.

Vlad

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Re: Folio and IRAs
« Reply #22 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.

yojoakak

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Re: Folio and IRAs
« Reply #23 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.)
« Last Edit: October 17, 2013, 10:54:35 PM by yojoakak »

core

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Re: Folio and IRAs
« Reply #24 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.

Rob L

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Re: Folio and IRAs
« Reply #25 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.

yojoakak

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Re: Folio and IRAs
« Reply #26 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...

howler99

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Re: Folio and IRAs
« Reply #27 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?

thezfunk

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Re: Re: Folio and IRAs
« Reply #28 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.

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GS

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Re: Folio and IRAs
« Reply #29 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.
« Last Edit: October 19, 2013, 11:43:32 AM by GS »