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Say I have 500 shares in company XYZ. 250 were purchased on 5/1/2012 and 250 were purchased on 9/1/2012. Is it possible to sell only the stocks that were held for 1 year (5/1/2012)? Avoiding the higher capital gains tax on stocks held for less than 1 year? Assume you are speaking to an idiot in regards to finance.

Edit: In the US.

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  • Is this in the US?
    – littleadv
    May 14, 2013 at 20:28
  • The usual rule is first in first out. Just to clarify you are referring to selling the ones bought in May 2012 now in May 2013, as your date in brackets does not match. (Also just a Note: in Australia we represent 5/1/2012 as 5th January 2012 - but I know in the US it represents 1st May 2012).
    – Victor
    May 14, 2013 at 20:40
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    @Joe not in the US you cannot average stocks.
    – littleadv
    May 14, 2013 at 21:15
  • @Joe to the best of my knowledge this is not new, just checked on etrade - LIFO, FIFO, pick. No averaging.
    – littleadv
    May 14, 2013 at 21:27
  • @JoeCoderGuy you may be were doing that, but that was not allowed then either. Now they report the cost basis, so you don't have a chance to "cheat" like that anymore.
    – littleadv
    May 14, 2013 at 22:33

1 Answer 1

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In the US you specify explicitly what stocks you're selling. Brokers now are required to keep track of cost basis and report it to the IRS on the 1099-B, so you have to tell the broker which position it is that you're closing. Usually, the default is FIFO (i.e.: when you sell, you're assumed to be closing the oldest position), but you can change it if you want.

In the US you cannot average costs basis of stocks (you can for mutual funds), so you either do FIFO, LIFO (last position closed first), or specify the specific positions when you submit the sale order.

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