It occurred to me that if one is consistently profitable (or losing) trading, one can use that to transfer capital by doing simultaneous opposite operations on at least two accounts. Has anyone ever done that, intentionally, purposefully? Any thoughts?
Pretty sure this is potentially classified under money laundering or something similar somewhere. It comes to my mind as having read about specifically or theoretically (maybe even on ET), I just can't remember the place. At the minimum the SEC/CFTC might take interest if it's done en masse.
It is not illegal in the U.S. per se, I would challenge those stating so to provide references to the law or case law. It could be illegal if you're doing a set of offsetting trades with no potential gain to transfer money from a taxable to a tax free (i.e. IRA) account, for example if you buy SPY options in one account and sell identical SPY options in the other in an activity that can by definition have no net profit and in fact loses you money on commissions. This runs afoul of the economic substance doctrine codified in sections 6662, 6662A, 6664, and 6676 of Section 26 US Code, which broadly state that any transaction without economic substance or business purpose that results in tax avoidance is illegal. There is no problem with the transactions, its the tax avoidance part thats illegal. Again with the CFTC/SEC, if you're doing it to manipulate markets then the market manipulation part is illegal, but just doing it is not and there's no per se standard that this type of trade is automatically manipulative. Note that this has nothing at all to do with what Hillary Clinton was alleged to have done with cattle futures, that was about trading without sufficient margin and misallocation of profits from another account to hers. But thanks for reminding us that election season is coming up and we need to bring every conversation we have, no matter how unrelated, back to some kind of negative hit on the candidate we don't like!
But eventually you will pay taxes on the IRA account, so they probably wouldn't care. IMO ..... You would want the transfer to go from the IRA to a non-IRA account. The reason? Perhaps the IRA account is locked and you can't access the funds until you are a certain age, but you want the money now. So you place opposing trades in the locked in IRA account and the non-IRA account, with the intention that the trade loses in the IRA account and makes money in the non-IRA account - you now have access to the money.
I respectfully disagree about the IRS not caring when they get their money. They may be the government, but they do get the concept of net present value and that a dollar delivered in 2035 is worth far less than a dollar delivered today. In fact they can calculate exactly how much because they can issue a 20 year bond today that they have to pay interest on for 20 years to get the dollar now instead of then. Also note, if you transfer from a taxable account, or better yet a traditional IRA into a Roth IRA you effectively avoided paying all tax forever. And finally, if you're just trying to raid your IRA you're again circumventing the early disbursement tax you'd normally be subject to. Any and all of these strategies are tax avoidance, and the IRS cares a lot. You may not be caught, just like you may not be caught for outright fabricating the info on your tax return. But if you get audited, the penalties far outweigh any risk adjusted benefits IMHO.
it requires two accounts and a willing broker why would a broker be willing? commissions if one has exceeded their legal campaign contributions they open up an account for 225k and Hillary opens an account with 5k I put on half long and half short on the open I close them both out on the close then I assign the wining trade to Hillary and the rest to the donor and I just keep doing this everyday until Hillary's account can margin 50% of the trade and she has 100k in her account and the donor has 100k in his account then we shut it all down and move on, and lay low
The legalities is another story and can be debated forever. But the reason to try and transfer money from a locked-in IRA to non-IRA account is valid. My post is based on experience - I was given a buy-out package to leave my job and I could take my pension funds with me, but they had to be in a locked-in retirement account until I turn 55. So I did consider creative ways to access the locked-in account. This is up in Canada and the government did eventually change their policy on the locked-in retirement accounts and gave easier access to them.