Stock Sell w/2 cost basis- tax?

[14tokihorn]

Hoping for a seasoned response here: The specifics-

I have 2 blocks in XYZ, w/ different cost basis. (erh, both are DRS; digitally registered).

So if I do a sell (or a partial sell... no matter), which cost basis when April taxes comes around?
What little experience I have in such things leads me to this - (1) its the 'sellers choice' - I can declare which ever I choose. (2) The Shareholder Admin. for XYZ is out of the picture as far as my cost basis - that explains why us individuals keep such records (or provide such to the IRS).
This matter will determine my taxable gain.

Do have it right?

Thanks

edit - I will not transact enough shares so that both costs come into play... just one or the other.

 

[Anastasis]

I thought it was first in, first out. But I ain't even close to an expert.

 

[14tokihorn]

Mmmm, could be.

I once had to determine the cost basis on a yearly basis, keeping in mind the distinction btwn. short/long term gain.. that involved dividend re-investment, therefore partial yearly shares.

But that's not applicable here.

 

[CO Horn]

Average cost basis, unless you can identify that you want to sell the shares with the lower basis.

 

[14tokihorn]

Thanks, I'm on it from IRS.gov, Pub. 550/551

 

[bevo_daddy]

Most companies, mine included, will default to FIFO (first in first out). But you can specify which basis you want to sell. Its called a versus purchase.

the choice is up to you ultimately when you do your taxes though

 

[texasbig12champs]

its up to you when you do your taxes. you can basically match any of the lots together with an equivalent amount of shares. most brokerage firms set you to FIFO by default so it may show that way on your transactions but it means nothing as you will determine the true match when and if you file your taxes lol

 

[14tokihorn]

From Pub 550 -In reply to:

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[texasbig12champs]

that whole shareholder services excerpt and written notification thing must have been written 80 years ago. in normal operation today most everything is electronic and you shouldnt have to mess with any of that.
if for some reason you really do have actual paper shares you keep in a lock box and have to mail them in and get them back then your taxes could be a royal pain. if you are likely 99% of everyone else and it is all electronic you don't really have to get anything beyond your transactions from your broker and then match them up the way you want them. keep in mind how you match them will effect your taxes ie. long term, short term, wash sale etc.

 

[LadyHornAustin]

In reply to:

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[TexonLongIsland]

As stated above: have your broker "mark the sale versus purchase" and specify which lot you are using as the cost basis. That way it is marked on the confirm.

It is important if you are doing this often or dealing in large dollar values because it will help prevent any reporting errors down the road. If you want to use the second lot on you taxes this year, but don't tell your broker then they will remove the first cost basis from your statement. If you sell the second lot 5 years from now you might/will probably forget that you switched. Might not the biggest deal, but if you do get audited then you would have to go back and untangle everything. They might ding you for taking too much of a loss or not fully reporting a gain.