Author Topic: Is this legal?  (Read 3712 times)

Fudgenut

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Is this legal?
« on: March 04, 2017, 01:13:39 PM »
Let's say you have a ROTH folio account and a cash folio account.  If you post a note for sale for a very large amount from the ROTH account, and then purchase it from your cash account, you could effectively move as much money as you wanted into your ROTH account.  I'm guessing this is illegal somehow, but our tax system is so screwed up I thought I'd check!

yojoakak

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Re: Is this legal?
« Reply #1 on: March 04, 2017, 11:09:53 PM »
It would only be a problem if they notice.

"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
« Last Edit: March 04, 2017, 11:18:00 PM by yojoakak »

Debt Free

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Re: Is this legal?
« Reply #2 on: March 04, 2017, 11:45:10 PM »
You're asking the wrong people.  Ask those who will be defending your position.  Here's a google list of them...

https://www.google.com/webhp?sourceid=chrome-instant&ion=1&espv=2&ie=UTF-8#q=securities+defense+attorney&*

What you're asking has wash sale written all over it.

Fred93

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Re: Is this legal?
« Reply #3 on: March 05, 2017, 12:58:26 AM »
...If you post a note for sale for a very large amount from the ROTH account, and then purchase it from your cash account,

As I understand it, the IRS does consider all your accounts, including nontaxable accounts, when interpreting the wash sale rule.

Besides the wash sale issue which others have mentioned, when selling to an account or entity you control (your IRA or a corporation you own, or perhaps a relative or other conspirator) at a price at which others in the market would not transact, that's not a market price, or said another way that's not an "arms length transaction".   Faking up a price this way to reduce your tax also violates something, even without the wash sale issue, but I don't have enough energy to go find the appropriate paragraph in the IRS code to quote for you.

So in other words, if instead you buying from your own IRA, and triggering the wash sale rule, you bought from Joe's IRA at an inflated price (and in return he bought from yours), there would be no wash sale rule issue, but there would be a violation of the rule about real market prices, and the IRS could come after both of you.

I've heard much more complex schemes, some pitched to me by accountants.  One pitch many years ago involved chartering a bank in some little island country, and then a bunch of transactions between this bank and a corporation they would create for me, which went around in a circle in a way that was supposedly ok in the end because of a typo in some paragraph of the IRS code.  (Sorry this sounds vague.  It was all a white-board talk, as they refused to write any of this down on paper.)  Fake is fake.  I threw them out of my office.  Couple of years later I read a Wall St Journal article about these guys.  Govt had shut down their scheme, and IRS was going after big bucks from all the customers who fell for this nonsense.

FYI: IANAL. 

bobeubanks

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Re: Is this legal?
« Reply #4 on: March 05, 2017, 09:32:44 PM »
Self dealing in an IRA is illegal.

Half Right

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Re: Is this legal?
« Reply #5 on: March 09, 2017, 04:19:13 PM »
Not only is it illegal but this used to be done on the stock exchange by trading between accounts at different brokers. The beauty was if you picked a stock that wasn't heavily traded you could go back and forth 10 times in 1 might as long as no other bids or asks were showing on Level II.

Unfortunately, it is illegal and in addition (1) if the trade takes place more than 10% from that days range, you brokers compliance officer will call and probably cancel the trade and (2) those High frequency trading bots will pick off your trade before it makes it.

Oh those good old days!!!