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

To: Colin Cody who wrote (1973)	3/10/1999 4:52:00 PM
From: professor	Read Replies (2) \| Respond to of 5810

colin, Can't one also use an average cost method to determine one's cost basis instead of fifo or the specified stock. prof.

To: Colin Cody who wrote (1973)	3/16/1999 12:25:00 AM
From: Richard Joslin	Read Replies (1) \| Respond to of 5810

Specific identification (i.e. selling non FIFO shares) entails providing a written confirmation/instruction to the broker delineating which shares the broker should sell. If you have shares with two brokers - in Colin's example Schwab and Merrill, shares held in Schwab CANNOT be specifically identified to have been sold in the Merrill account. Instructions to Merrill to specifically sell certain Schwab shares will not be recognized by the brokers nor by the IRS. In this case, the specific identification would be invalid and the shares sold by Schwab would treated as sold, most likely on a FIFO basis. The rules on specific identification follow: REG 1.1012 (c) Sale Of Stock (1) In General. If shares of stock in a corporation are sold or transferred by a taxpayer who purchased or acquired lots of stock on different dates or at different prices, and the lot from which the stock was sold or transferred cannot be adequately identified, the stock sold or transferred shall be charged against the earliest of such lots purchased or acquired in order to determine the cost or other basis of such stock and in order to determine the holding period of such stock for purposes of Subchapter P, Chapter 1 of the Code. If, on the other hand, the lot from which the stock is sold or transferred can be adequately identified, the rule stated in the preceding sentence is not applicable. As to what constitutes "adequate identification", see subparagraphs (2), (3), and (4) of this paragraph. (2) Identification Of Stock. An adequate identification is made if it is shown that certificates representing shares of stock from a lot which was purchased or acquired on a certain date or for a certain price were delivered to the taxpayer's transferee. Except as otherwise provided in subparagraph (3) or (4) of this paragraph, such stock certificates delivered to the transferee constitute the stock sold or transferred by the taxpayer. Thus, unless the requirements of subparagraph (3) or (4) of this paragraph are met, the stock sold or transferred is charged to the lot to which the certificates delivered to the transferee belong, whether or not the taxpayer intends, or instructs his broker or other agent, to sell or transfer stock from a lot purchased or acquired on a different date or for a different price. (3) Identification On Confirmation Document. (i) Where the stock is left in the custody of a broker or other agent, an adequate identification is made if: (a) At the time of the sale or transfer, the taxpayer specifies to such broker or other agent having custody of the stock the particular stock to be sold or transferred, and (b) Within a reasonable time thereafter, confirmation of such specification is set forth in a written document from such broker or other agent. Stock identified pursuant to this subdivision is the stock sold or transferred by the taxpayer, even though stock certificates from a different lot are delivered to the taxpayer's transferee. (ii) Where a single stock certificate represents stock from different lots, where such certificate is held by the taxpayer rather than his broker or other agent, and where the taxpayer sells a part of the stock represented by such certificate through a broker or other agent, an adequate identification is made if: (a) At the time of the delivery of the certificate to the broker or other agent, the taxpayer specifies to such broker or other agent the particular stock to be sold or transferred, and (b) Within a reasonable time thereafter, confirmation of such specification is set forth in a written document from such broker or agent. Where part of the stock represented by a single certificate is sold or transferred directly by the taxpayer to the purchaser or transferee instead of through a broker or other agent, an adequate identification is made if the taxpayer maintains a written record of the particular stock which he intended to sell or transfer.