Folio and IRAs

[Zach]

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.

[Zach]

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.

[Rob L]

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.

[Rob L]

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.

[viking]

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?

[Rob L]

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

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 ...

[viking]

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?

[Rob L]

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?

[Rob L]

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).

[Rob L]

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.

[yojoakak]

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!

[twigster]

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? 

[Bohb Daishi]

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.

[core]

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.

[ggnoob1337]

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?