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Strategies & Market Trends : Income Taxes and Record Keeping ( tax ) -- Ignore unavailable to you. Want to Upgrade?

To: Ginko who wrote (2322)	10/8/1999 7:14:00 PM
From: V.	Read Replies (2) \| Respond to of 5810

Hi Bean, I am not a CPA, so the thread should correct me if I'm mistaken, please. My understanding is that there are only 2 methods to figure capital gain/losses on securities: 1) FIFO 2) Identification of Shares The default is FIFO with the IRS. If one doesn't declare the ID of shares method, the IRS assumes the FIFO method is used. ID of shares method documentation varies depending on who is asked <g>, but one has to instruct the broker to sell PARTICULAR shares (shares which have been specifically 'identified' by price & date purchased). This is simple if one has the actual stock certificates, but not as easy if the shares are being held in street name in which case one needs to SPECIFY to the broker when selling that particular shares bought on confirmation # whatever are being sold. This is difficult or impossible to do if you trade online for yourself and have no means to write-in the confirmation number of the shares bought on a particular date/price on the confirmation when they are sold. I know traders who simply write on their sell confirmations which shares were sold using the buy confirmation number as 'proof'. This doesn't seem like the proper or legit way of handling the documentation as specific shares weren't actually identified as being sold since they're held in street name. All they can 'prove' is that they sold some shares - not which shares were actually sold! One notifies the IRS that the ID of shares method has been selected by stating this on Schedule D. One can change from the FIFO to ID of shares method without IRS' permission but one cannot change back from ID of shares to FIFO without the IRS' written consent. Also, one must use the same method for all trades in a tax year. You can't use FIFO for one trade, ID of shares for the other, etc. based on which method provides the best tax consequences to the filer. With mutual funds, you can use FIFO, LIFO, average cost, or ID of shares methods to calculate losses/gains. Again, thread CPAs should please make corrections to this post if necessary.