2 replies to this topic

[dougig]

if I buy a certain stock over a period of time 3 or 4 times - can I pick and choose which of the purchases I made - when I decide to sell ? I know that in business - the IRS requires-that inventory must be SOLD in 1 of 2 ways: 1-first in - first out or 2-first in - last out I seem to remember that somewhere I read-that it is possible to pick & choose which stock purchases you wish to sell. Can somebody set me straight ? dougig

[U.F.O.]

You can do whatever you want to, but IMO if the IRS audits you a trade could be disallowed. Example. You buy 4 blocks of the same stock at $2, $4, $6 and $8. Two month's later you sell one of the blocks at $5 and for tax purposes try to declare a $3 loss by assigning the sale to the highest priced purchase. The IRS might try to argue it should be assigned to the 1st purchase at $2 and that you owe tax on the difference. The easiest way I've found is to just run an average of all the blocks if bought in the same approximate timeframe and if dealing with ST gains only. Average cost basis is very easy to explain during audits. LT capital gains would create a different tactic. ufo

[U.F.O.]

Doug, forgot to add that what the IRS looks for is consistency in your accounting treatment. You can use FIFO, LIFO, price average, whatever, but it needs to be done the same way each successive year. If you use the "what benefits me at the time" accounting system and don't show an order to your filings year by year, some bored IRS field rep. could make life miserable for you in the wallet. Audits suck the big one! ufo