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My RSU vesting happens with an associated sell-to-cover transaction for tax purposes. The page on my brokerage (E-Trade)'s website shows the cost-basis for this transaction as though it was calculated using the LIFO method (i.e. the cost was very close to the vesting price).

However, since I already had some vested shares in my account from a previous date (when the vesting price was higher), I feel I can claim some capital loss on this sell-to-cover transaction by using the FIFO method!

I had set my default cost-basis method to be FIFO (in the account's settings), but from the above, it seems that the sell-to-cover did not use it!

So my question is: Are sell-to-cover transactions "forced" to use LIFO (by the IRS perhaps)? Or is it a broker-specific thing?

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Sell-to-cover sells shares from the specific lot of RSUs that are vesting. To change that, you'd have to elect cash withholding and manually sell the shares you want to sell.

However, the strategy you propose would create wash sales.

For example, you already own 50 shares with a basis of $100/sh, and are vesting into 100 shares at $80/sh (say $2,400 for withholding, approximating federal plus FICA). If you were to sell 30 of your original shares at a loss (to raise $2,400 for the required withholding) within 30 days (before and after) of your RSUs vesting, the $20/sh loss would be disallowed and that disallowed loss would be added to your new RSU basis. At the end of that series of transactions, it comes out exactly the same tax-wise as sell-to-cover, just with additional adjustments made to account for the wash sales.

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