Break even calculation question
- Thread starter wxytrader
- Start date
This answer is limited in scope to US federal tax law.
Your broker probably has a function within your account that allows you to choose which shares you are selling. This is sometimes referred to by accountants as specific identification. Your broker may use a different expression, such as lot selection, or something else.
With some brokers, it may be possible to choose which lot of shares you are selling even after the sell order has been filled, before it has settled. (FYI: Stock sales are moving to T+1 in a couple months.)
If you do not make a choice, then the general rule is FIFO, first in, first out. In other words, for tax purposes, you sold the shares that you purchased first.
You can read about this in IRS Publication 550, Investment Income and Expenses. The relevant discussion begins near the bottom of page 60.
I have attached a PDF.
This publication is the current version, and is meant to be used in the preparation of 2023 tax returns.
And it talks about stock certificates. LMAO
Your broker probably has a function within your account that allows you to choose which shares you are selling. This is sometimes referred to by accountants as specific identification. Your broker may use a different expression, such as lot selection, or something else.
With some brokers, it may be possible to choose which lot of shares you are selling even after the sell order has been filled, before it has settled. (FYI: Stock sales are moving to T+1 in a couple months.)
If you do not make a choice, then the general rule is FIFO, first in, first out. In other words, for tax purposes, you sold the shares that you purchased first.
You can read about this in IRS Publication 550, Investment Income and Expenses. The relevant discussion begins near the bottom of page 60.
I have attached a PDF.
This publication is the current version, and is meant to be used in the preparation of 2023 tax returns.
And it talks about stock certificates. LMAO
If you are in Canada you have 100 shares that cost you 7.50
Correct! With FIFO rules you have 100 shares @ $5. I actually managed to calculate fifo on a spreadsheet without a script.
Well my broker uses FIFO, so when the position updates after the sale it should show 100 shares @ $5 cost basis.
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I did say Canada. The tax system in the frozen north doesn't use FIFO.
Yeah I'm in Canada. You do realize that we get 40° temperatures over here in "The frozen North" in the summer? Celsius! I know you Americans think we are shoveling glaciers from our doorways and pushing our elders off on ice drifts but half of the US is as cold as Canada and much colder than the coast.
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So for tax purposes you can't use FIFO.
Who is your broker?
I have used most over the past few years and none use FIFO.
I noticed you used should, aren't you sure?
You forgot to mention -40° temperatures in the winter. And that doesn't matter whether it's C or F It's 40 below.
I'm also in Canada.
It totally depends where you are. There's parts that don't get any snow at all, all year.
https://blogs.sas.com/content/sastraining/2017/08/10/us-states-north-of-canada/