Thank you for responding; great info. Based on this info it sounds like I can do what I was hoping which is to draw down this account slowly in a tax friendly way (I am an early retiree and need the money for living expenses). That is, my account is currently set to Specific ID (I changed that a year ago). I am going to sell off all of the specific lots acquired since 1/1/2012 (covered shares) and report the actual cost basis per lot on my taxes. Once they are gone, I will switch back to Average for the remaining shares acquired prior to 1/1/2012 (uncovered shares) and report the average cost basis on my taxes as I sell them. Although I’m not sure I need to make the change since all shares acquired before 1/1/2012 are currently showing as one large lot with what I assume is the Average cost basis. This mutual fund account is with Vanguard. Does this plan keep me in good graces with the IRS?
