"Can" you? Well of course you can, you "can" report anything you want.
But "should" you? Really, no, not if the broker is reporting the cost basis to the IRS. The broker at some point asked you how you wanted to determine basis for the sale of stock, and told you FIFO would be the default method if you didn't respond with another default method to use. IF you want to actually select lots of stock to report as the basis associated with the sale THEN you need to tell the broker what lots to sell before the trade settles.
As a practical matter basis reported by brokers gets changed all the time, due to quite legitimate reasons, so I'd guess the chances of being audited would be very slim.
Tom Young
"Can" you? Well of course you can, you "can" report anything you want.
But "should" you? Really, no, not if the broker is reporting the cost basis to the IRS. The broker at some point asked you how you wanted to determine basis for the sale of stock, and told you FIFO would be the default method if you didn't respond with another default method to use. IF you want to actually select lots of stock to report as the basis associated with the sale THEN you need to tell the broker what lots to sell before the trade settles.
As a practical matter basis reported by brokers gets changed all the time, due to quite legitimate reasons, so I'd guess the chances of being audited would be very slim.
Tom Young
Hey Tom, Thanks a lot for your prompt response. In my case, one of the purchase stock lots reported to IRS has already been used for a sale in 2012. My brokerage obviously does not know this and hence applied this same stock lot to a sale in 2016 as well. So, this is a legitimate reason for me to change cost basis and stock lots.
I find that very odd as brokers have been keeping track of cost basis by lots for decades and it's difficult to comprehend how a broker could make this kind of mistake. You might want to ask about this.
Any chance YOU used that lot in your own records, (e.g., Quicken), for the 2012 sale while the broker used a different lot and you didn't catch the difference?
Again, as a practical matter I'm sure hundreds of thousands of sales have their basis adjusted so the simple fact of adjustment certainly shouldn't raise red flags with the IRS. Most brokers these days, I'd guess, even have lot-by-lot basis information available online so you may want to see how closely your information for you unsold lots lines up with theirs.
It is too late to reassign the lot at tax time. Your basis is reported to the IRS.
You either set a different option other than FIFO before you sell, or inform the broker in writing on or about the time the trade settles.
If there is a broker error (lot already reported previously), that is a horse of a different color.
Cost basis only tracked and reported as of 2011.
TurboTax supports this. Use Code B for "incorrect Basis". Have good records to substantiate your filing.