When you sell individual stocks, you can choose the specific shares you want to sell. Most brokers provide you choices such as Minimum Tax, Specific Identification, Highest In, First Out, First in, First Out, and Last in, Last Out. You set a default method with the broker, or let them know on a trade by trade basis prior to settlement. If you don't select a method, they have a default - usually First In, First Out. Except for certain mutual fund shares, discussed below, you cannot use the average price per share to figure gain or loss on the sale of the shares.
For Mutual Funds, the broker and mutual fund default is Average Cost Method. If you did not previously use an average basis for a sale, exchange, or redemption of other shares in the same mutual fund, you can choose one of the following: methods.
• Specific share identification.
• First-in first-out (FIFO)
To make the election to use the average basis method for your covered securities, you must send written notice to the custodian or agent who keeps the account. This isn't necessary if they use it as their default. You must send written notice to the custodian to revoke the election to use the average basis method.
I recommend you contact your broker to determine what cost basis you used for prior sales, and what options you have for future sales.
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