I am considering selling an asset, in this case, some shares of a stock (let say Stock X) that I purchased. It has recently ran up quite a bit since the purchase of it, and would like to sell some of the shares to diversify a bit. However, I would like to make sure the capital gains are taxed as long term capital gains, and my behavior is a bit funny in the beginning, so I wanted to make sure I am calculating the selling dates correctly.
I purchased 20 shares on September 16, 2019.
I purchased 5 shares on October 3, 2019.
total 25
I sold 5 shares on October 9, 2019.
total 20
I sold 10 shares on February 4, 2020.
total 10
I bought 10 shares on February 6, 2020.
In the end, that leaves me with total 20 shares.
I would assume that I can sell 10 shares on or after September 17, 2020 and have it count for long term capital gains, and then sell 10 shares on or after February 7, 2021 for long term capital gains.
Is this correct? If not, why, and what would the dates be?
you can use specific identification. However, you must identify the shares to be sold before they are sold. I'm assuming you didn't use this method for shares sold so far in 2020. some brokers will accept standing orders to use S I but then on every sale you must identify the lots.
here's from IRB 2010-47
The final regulations retain the requirement for written confirmation of all sales and transfers of specifically identified stock as a reasonable safeguard that specific identification orders are properly executed. However, in response to these comments, the final regulations provide that account statements or other documents a broker or agent periodically provides to a taxpayer may serve as written confirmation if provided to the taxpayer within a reasonable time after the sale or transfer.
incorrect. you purchased 20 shares on 9/16/2019 and have sold 15 of them leaving 5 shares
you purchased 5 shares on 10/3/19 and still have them
you purchased 10 shares on 2/6/20 and still have them
for all sales to be LTCG
5 would have to be sold on or after 9/17/2020
5 would have to be sold on or after 10/4/2020
10 would have to be sold on or after 2/7/2021
Ah okay, so you can't pick and choose which ones you claim to have sold then? It always counts as you sold whatever your oldest shares were?
you can use specific identification. However, you must identify the shares to be sold before they are sold. I'm assuming you didn't use this method for shares sold so far in 2020. some brokers will accept standing orders to use S I but then on every sale you must identify the lots.
here's from IRB 2010-47
The final regulations retain the requirement for written confirmation of all sales and transfers of specifically identified stock as a reasonable safeguard that specific identification orders are properly executed. However, in response to these comments, the final regulations provide that account statements or other documents a broker or agent periodically provides to a taxpayer may serve as written confirmation if provided to the taxpayer within a reasonable time after the sale or transfer.
The standard default method used when selling is FIFO (first in first out) unless otherwise specified to the broker at the time of sale.
@Critter-3 wrote:
The standard default method used when selling is FIFO (first in first out) unless otherwise specified to the broker at the time of sale.
I agree with @Critter-3 .
The broker will use the standing rule to construct your 1099-B sent to the IRS.
The default is FIFO,
You could for example change your standing rule to Last In, First Out.
If you did that it would only operate on future sales.
The 10 shares you sell on 9/17/20 consist of 5 from the lot you purchased 9/16/19 and 5 from the lot your purchased on 10/3/19. So, five will be long term and 5 short term.
The 10 shares you sell February 17, 2021 will come from the lot you purchased on 2-6-20, so they will be long term.