Harmoney

[Bjauck]

I would have expected Harmoney to have sought legal advice as to what constitutes taxable income for an investor as they are obliged to deduct RWT from it.

On their Investor-faq page they state under "How is Forecast Annual Return (FAR) calculated?":
"... Forecast annual net income is interest less defaults and service fees. Defaults are calculated as the percentage of outstanding principal that is forecast to be written off as a bad debt over the next 12 months."

So it seems that Harmoney would consider actual net income to be interest less actual defaults and service fees. I am presuming that defaults are the value of delinquent notes. Would Harmoney consider that this actual net income be the taxable income to be entered on an investor's tax return?

I have sent an email on this point to investor enquiries. Eventually I got an answer which stated that Harmoney may choose to take legal action against defaulted borrowers to recover costs. In other words my question was not understood. Maybe someone else could send an investor enquiry on this point.

[Harvey Specter]

I would have expected Harmoney to have sought legal advice as to what constitutes taxable income for an investor as they are obliged to deduct RWT from it.

The income bit is quite settled. It is any money coming in and to the extent it is interest, they withhold RWT.

The question is whether bad debts are deductible and the answer is murky and probably depends on the individual investors personal situation so not something Harmoney can answer (and neither can the IRD unless they put your account into dispute - you cant even get a binding ruling as the more I think about it, the answer is a question of fact, not law).

Re their 'annual net income', I think this is misleading as most think of net interest as after tax but they only mean net of defaults. It is not a tax effected number.