Re: <<There is probably a last-in-first-out rule>>
Actually, there's a first-in first-out rule.
See fairmark.com for more info on tax rules.
In your example, unless you specify, your sale is considered to be your first two lots. The resulting loss is considered to be a wash sale because of the shares you bought on 10/8. So, instead of deducting the loss from your income, you add it to the basis of the shares you bought on 10/8.
If you specify that you are selling from the last lot purchased, then there is no wash sale because wash sale rules don't apply if you are reporting a gain.
With a brokerage, you can just tell them over the phone which shares you want to sell, and then they provide a written acknowledgement of which shares you specified. That's all there is to it.
With electronic brokers, we are in uncharted territory, because it has not been conclusively established whether electronic communications (email, Internet, etc.) can substitute for a written acknowledgement from the broker. If you want to take a chance on email being acceptable, you can send the broker an email at the time you place an order, and hopefully they will send you an acknowledgement, but if their software has a feature which keeps track of your tax gains and losses, it may not get done correctly. E*Trade had a feature which would ask you which shares you wanted to sell if you had more than one purchase date in your portfolio, but last time I checked, it did not work consistently. I finally found a possible way around this, which I will post, if anyone is interested.
Richard (not a tax professional) |
