Author Topic: Folio and IRAs  (Read 110799 times)

lender_john

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Re: Folio and IRAs
« Reply #210 on: March 17, 2014, 10:47:37 AM »

I'm waiting for them to 'get their ducks in a row'.. while my IRA return keeps going down and down since I can't (or shouldn't) reinvest anything. 
With the current mess I'd be perfectly happy to sell my IRA portfolio and transfer to another investment.. Of course I can't (or shouldn't) do that either.

BruiserB

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Folio and IRAs
« Reply #211 on: March 17, 2014, 08:21:23 PM »
I'm quite pleased with my returns in my IRA account and have no issue continuing to reinvest.  I would like them to get these Folio issues clarified though as I think it would be an advantage to be able to trade in Folio and also it would be an effective way to liquidate if/when it comes time to take a distribution or roll over to a different investment.  Having to wait until all loans pay back to do so seems ridiculous.  It doesn't seem as though it is a real issue to use Folio, but I am refraining from doing so till the doubt is removed. 

It is important to remember that Self Directed IRA Services is technically the custodian of our IRA accounts, so I find it hard to believe a transfer of funds/securities between LC and Folio could be considered a withdrawal or distribution. A distribution would have to come through SD IRA Services. I can understand the concerns about the potential to buy/sell notes with yourself and/or some related 3rd party, but that's just blatantly illegal and it would be stupid to do this. 


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lender_john

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Re: Folio and IRAs
« Reply #212 on: March 17, 2014, 10:44:41 PM »
Unfortunately since I'm in a folio-only state, the only way to reinvest is through Folio.

twigster

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Re: IRA Accounts and Selling Notes
« Reply #213 on: April 08, 2014, 10:12:54 AM »
I have applied for a Folio account with my newly set up Roth IRA and it all processed OK and then said wait 4 business days.  That was a while ago and it is still in the same status so I called LC and the lady said that Folios are no longer allowed for IRA accounts.

If anyone is successful in getting a Folio open with an IRA after this can you let me know (or if you have any other info)?  It seems very odd (which I pointed out to the girl on the phone) that the system would allow you to apply for the folio and it just gets hung up and never goes though.  She implied there may eventually be a time when it is allowed (again) but could not give any kind of time estimate.
« Last Edit: April 08, 2014, 10:15:11 AM by twigster »

core

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Re: IRA Accounts and Selling Notes
« Reply #214 on: April 08, 2014, 10:36:26 AM »
Twigster I took some time to read back and this link has already been given to you and ack'd.

http://www.lendacademy.com/forum/index.php?topic=1674.0

The LC folks will say what ever it is that they want to say. 

yojoakak

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Re: Folio and IRAs
« Reply #215 on: April 08, 2014, 12:28:54 PM »
The reason it can cause problems is because buyers/sellers determine a market price for their notes, and you could theoretically sell notes worth hundreds or thousands of dollars from a taxable account to your IRA for $0.01. While this is blatant tax evasion, I think LC would be wise to restrict IRAs to no trading, unless market prices become determined by LC in the future.

That can happen ANYWHERE, not just at LendingClub.

"Moondra typically executed his wash sales in the after-hours market (defined herein as the period between the regular market's 4:00 p.m. close and the 9:30 a.m. opening the next day), and at prices away from the prevailing market price...

Between November 24 and December 10, 1999, Moondra executed 56 wash sales in the securities of 12 different issuers between taxable and tax-sheltered accounts in which he had trading authority. These trades resulted in no change in beneficial ownership but created artificial losses of approximately $161,695 in the taxable accounts and artificial gains of approximately $161,695 in the tax-sheltered accounts. "

http://www.sec.gov/litigation/admin/34-48432.htm

core

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Re: Folio and IRAs
« Reply #216 on: April 08, 2014, 04:16:57 PM »
Put most of these tax fraudster arguments away.  I can claim billions in losses in options and futures and nobody is the wiser.  Investment taxes, like most taxes, still mostly on the honor system.  Basis reporting on stocks just since 2012?  Yeah, IRS sees tiny fraud opportunity in p2p and goes after it while ignoring 99.997% of the rest of fraud.  Makes friggin sense to me.  Try again.

BruiserB

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Folio and IRAs
« Reply #217 on: April 08, 2014, 09:45:38 PM »
Put most of these tax fraudster arguments away.  I can claim billions in losses in options and futures and nobody is the wiser.  Investment taxes, like most taxes, still mostly on the honor system.  Basis reporting on stocks just since 2012?  Yeah, IRS sees tiny fraud opportunity in p2p and goes after it while ignoring 99.997% of the rest of fraud.  Makes friggin sense to me.  Try again.

It doesn't necessarily mean the IRS told LendingClub that they couldn't allow Folio access because of the potential for self dealing.  It could just be that LendingClub saw the potential for it and decided to disallow it in their own judgement.  There's nothing that prohibits a company from having more conservative rules than the law would allow.  Maybe LC decided they don't need the potential bad press that could come from someone's tax cheating before their IPO?  I'm not saying that is the case but it could be.

I don't see any other explanation.....it obviously isn't expressly prohibited, or those who have traded in Folio would have ended up in hot water.....but it doesn't seem that anyone has.  It feels like LC is just being extra conservative, which probably isn't a bad idea for them at this point.


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core

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Re: Folio and IRAs
« Reply #218 on: April 09, 2014, 01:01:24 AM »
Maybe LC decided they don't need the potential bad press that could come from someone's tax cheating before their IPO?

That's a possibility.  But how is that issue solved by very quietly prohibiting it and not enforcing anything?  How would this newspaper headline look right before the IPO:  Lending Club makes possible biggest tax cheat in decades -- User agreement says not to do it  That doesn't make them look any better, does it?

Regarding self-dealing in general... It's rather easy to do "accidentally", since LC doesn't show you seller names.  It might be one of your other accounts.  Maybe you didn't even post the listing (IR auto sell).

As far as I know, legally there's nothing wrong with self-dealing as long as the price is fair.  And who is to decide what's a "fair" price?  Not LC or the IRS.  If it was easy to calculate then prices would be tighter.  It's not all that easy.  Maybe $1 seems like a fair price to me.  Yeah that's the ticket.  They'd have quite the battle on their hands trying to prove otherwise beyond a doubt.  I have data showing that people have sold on-time notes for -99% before.  You might call it seller mistake but prove it.  Those past sales would boost my argument that it's not all that unusual.  I wouldn't want to be sitting in the defendant's chair though.

twigster

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Re: IRA Accounts and Selling Notes
« Reply #219 on: April 09, 2014, 09:36:44 AM »
Sorry about posting it in the wrong spot!

Rob L

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Re: IRA Accounts and Selling Notes
« Reply #220 on: April 09, 2014, 09:46:42 AM »
Hey Zach, how about moving this thread's posts to http://www.lendacademy.com/forum/index.php?topic=1674.0?
Keeps everything in one place and there is some recent interesting info here.

Zach

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Re: IRA Accounts and Selling Notes
« Reply #221 on: April 09, 2014, 10:24:14 AM »
Hey Zach, how about moving this thread's posts to http://www.lendacademy.com/forum/index.php?topic=1674.0?
Keeps everything in one place and there is some recent interesting info here.

Done.

twigster

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Re: Folio and IRAs
« Reply #222 on: April 09, 2014, 10:38:35 AM »
I just got off the phone with Lending Club again.  This time the guy was more explanatory than the gal I spoke to previously.  He said they were aware of the problem and were working on a fix to allow trading in notes from the IRA accounts.  He said it may be complete within a matter of months but could not give an exact date! 

lender_john

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Re: Folio and IRAs
« Reply #223 on: April 09, 2014, 10:49:58 AM »
I just got off the phone with Lending Club again.  This time the guy was more explanatory than the gal I spoke to previously.  He said they were aware of the problem and were working on a fix to allow trading in notes from the IRA accounts.  He said it may be complete within a matter of months but could not give an exact date!

Of course this sounds exactly like what they told me a few months ago... so it should be taken with a very large grain of salt.

Without reinvesting and selling late notes, my IRA is starting to lose money...  :-[

thezfunk

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Re: Folio and IRAs
« Reply #224 on: April 09, 2014, 10:59:58 AM »
I just got off the phone with Lending Club again.  This time the guy was more explanatory than the gal I spoke to previously.  He said they were aware of the problem and were working on a fix to allow trading in notes from the IRA accounts.  He said it may be complete within a matter of months but could not give an exact date!

Of course this sounds exactly like what they told me a few months ago... so it should be taken with a very large grain of salt.

Without reinvesting and selling late notes, my IRA is starting to lose money...  :-[

You mean your returns are dropping or do you actually have negative returns?  Big difference.