2 accounts same stock. What is my cost basis

[mau3535]

I have the same stock under 2 different accounts. One is being sold with a profit, the other with a loss. Does the cost basis act per account combined average or are they separate buckets?

[Mike9241]

assuming both accounts are fully taxable, ie neither is a retirement account, separate buckets based on what each account has as the tax basis.  sale at a loss could trigger the wash sale rule if shares on the gain side or shares still held were purchased within 31 days of the loss sale (either before or after). 

[mau3535]

Thank you Mike. So to clarify and confirm. Both are regular taxable brokerage accounts. So I am more interested in only selling the bucket that has a positive gain. The account that is losing will be held until it comes back which will be greater than 30 days from now. So in essence, the bucket that has the gain will use the cost basis for that specific account, correct?

[Mike9241]

your previous post suggested both gain and loss shares would be sold. however, just selling the gain shares can create an issue. 

there is a methodology that you probably have previously established for which shares are sold.  generally, you selected either FIFO - the first shares bought are the first shares sold (the usual default method with brokers if LIFO is not selected) or LIFO - the last shares bought are the first shares sold. 

so if you sell the gain shares, depending on the methodology: 

if FIFO you would use the first shares bought even if in a different account  

if LIFO you would use the last shares bought even if in a different account.

The IRS doesn't care that they are in different accounts. 

so the 1099-B you get may be incorrect.

the broker will most likely report what they have as the tax basis for the shares sold. you may need to adjust this when doing your 1040.   

[mau3535]

Thanks for your input!!

[rjs]

@Mike9241 

The OP didn't say whether the two accounts are with the same broker or with different brokers. If the two accounts are with different brokers, would FIFO or LIFO still apply, or would she be selling the specific shares in the account that she sells from, with the basis being the purchase price of those specific shares, without regard to when they were purchased?

[Mike9241]

here's my thinking.  under the current law, if you sell at a loss in a taxable account and then violate the wash sale rule in a nontaxable account, it doesn't matter whether the a/c's are with the same broker or not. the wash sale rule will apply. So it's not the a/c or broker that matters.  I would also conclude that if an H&W each had their own taxable accounts and one sold a security at a loss and the other purchased the identical security during the 61-day-period, the wash sale rule would apply. Thus, I would conclude it doesn't matter whether you have the securities (all taxable accounts) at one brokerage - multiple accounts or multiple brokers.  However, if you ask me to point to something specific in the IRS rules, I can find nothing that's current.  And of course with multiple brokers, each would use what they have as the tax basis to report the sale. Even with multiple accounts at the same broker (H&W accounts), when stocks were sold at a loss, I've seen the account use its cost basis with no attempt to apply the wash sale rule because substantially identical stock was purchased during the 61-day-period in the other account. Nor have I seen the FIFO basis in the other account used if those shares were bought before the shares that were sold in the first account.   And to be honest I've never seen an attempt by professional tax preparers to do other than report what's on the 1099-B. Their problem is that they don't have full information to do otherwise.  

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so perhaps to best thing is to contact the brokers, though I'm sure they'll tell you to talk to your accountant.

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I guess a question would be what do CPAs do when auditing the financial statements and preparing a tax return of a client that has multiple locations with identical goods (inventory)  but bought at different times and costs? Would they treat each location separately in determining the FIFO cost of each location's inventory and then add each to determine the total FIFO cost or would they combine all purchases for all locations to determine the FIFO cost for all stores as if there was just one.