Tax Basis Declaration: FIFO, LIFO, or Maximize Losses?

A

Arjun1

I came across this on the IB website:

Tax Basis Declaration:

FIFO (First In First Out)

LIFO (Last In Last Out)

Maximize Losses


What is the difference between the three?
 
The tax code allows you to match shares to your benefit so I cannot imagine why the FIFO and LIFO info is even posted.

FIFO - First In, First Out
First shares bought are matched with first shares sold.

LIFO - Last In, First Out
self-explanatory

FIFO and LIFO are used in determining inventory costs, but I have never seen them used in regards to stocks. Some folks could use them I guess.
 
Some tax focused mgrs out there use the "Maximized Losses" Method which is sometimes referred to as the "High Cost Method" which will match your closed positions to the tax lots with the highest cost therby reducing your capital gains. There is also a hybrid method called "specific identification" you may want to look into.
 
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