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

To: Shoe who wrote (1527)	11/29/1998 10:46:00 PM
From: I Know Nada	Respond to of 5810

Hi Zapato, Yes, the IRS uses FIFO as their 'default' method. So, when no method is declared, they assume FIFO. As for the 2nd part of your ?, I unfortunately have never used more than one trading account at a time. My longer term portfolio is with a different house, but my trading accounts have always been transferred or the position was closed simultaneously with the opening of a new account. However, IMO only (not verified with the IRS), I would think that since each brokerage firm sends you a 1099MISC at the end of the year showing only your sales proceeds that logically, you would want to keep separate spread sheet for each brokerage account, though you would probably intermingle trades by date on your Schedule D. (As an aside, when there are many buys over various times, you can enter "various" as the date of purchase on Schedule D though you obviously must adhere to either the FIFO or ID method to calculate the actual gain or loss. I typically attach my spread sheet to my return, in case they want to look at every single trade.) As to whether you would use the FIFO method between more than one account, it seems to me that since the shares being held by different brokerages are all the same, that FIFO would apply between the different accounts. The vehicle used to buy and sell (which brokerage places the order) would be irrelevant since you are trading in street name. Going one step further, the IRS typically likes to be sure that the taxpayer cannot use 'loopholes' to get out of paying taxes (check wash sale rules, for example). So, if one were clever, he could manipulate his trades between several brokerages to constantly show losses by either comingling trades or keeping those with specific brokerages unique. If the IRS suspected that this could be a reason for keeping separate accounts, they would surely not allow this to continue. For that reason, I would suspect that all trades are subject to one FIFO methodology, regardless of how many different accounts one has. I would appreciate knowing if my assumption above is correct so I hope that someone with experience in this area will post 'cause with regard to this particular question, it's clear that... I Know Nada