Author Topic: Folio and IRAs  (Read 114820 times)

Rob L

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Re: Folio and IRAs
« Reply #135 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.

RaymondG

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Re: Folio and IRAs
« Reply #136 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.
« Last Edit: December 29, 2013, 12:57:37 AM by RaymondG »

Zach

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Re: Folio and IRAs
« Reply #137 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

RaymondG

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Re: Folio and IRAs
« Reply #138 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

My point is that's why LC forbid IRAs trade loans in Foliofn, which is right.

core

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Re: Folio and IRAs
« Reply #139 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.

Rob L

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Re: Folio and IRAs
« Reply #140 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.?
« Last Edit: January 01, 2014, 10:45:06 AM by Rob L »

pplinvestor

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Re: Folio and IRAs
« Reply #141 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.

Randawl

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Re: Folio and IRAs
« Reply #142 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.

core

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Re: Folio and IRAs
« Reply #143 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.

Simon

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Re: Folio and IRAs
« Reply #144 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.
Writes at the peer to peer lending site LendingMemo.

Rob L

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Re: Folio and IRAs
« Reply #145 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).

lender_john

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Re: Folio and IRAs
« Reply #146 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..

GS

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Re: Folio and IRAs
« Reply #147 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".
« Last Edit: January 04, 2014, 01:11:20 PM by GS »

graceful

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Re: Folio and IRAs
« Reply #148 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
« Last Edit: January 04, 2014, 01:26:38 PM by graceful »

GS

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Re: Folio and IRAs
« Reply #149 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?
« Last Edit: January 04, 2014, 01:41:10 PM by GS »