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I have the following situation (all numbers and dates are for illustrational purposes):

  • On Jan 1, 2015, I bought $100 worth of an Exchange Traded Fund (ETF).
  • On Jan 1, 2016, I bought $100 more of the same fund.

What if today I sell 50% of what I have for this ETF -- would gains be considered short-term or long-term for US tax purposes?

Thanks

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You sold specific shares of the ETF, and the capital gains tax depends on which ones. Your brokerage may have chosen which shares to sell automatically based on some rule. For example, if your account is set up as FIFO (first in first out), your gain is long term. If it's LIFO (last in first out), it's short term. Sometimes there are other rules available. Or you can tell your brokerage manually which shares to sell (sometimes even after the trade but before it settles).

You may need to ask your broker.

  • US brokers no longer offer automatic LIFO; it was prohibited a few years ago. (Maybe by Dodd-Frank? I'm not sure.) Your choices now are FIFO or specific -- although of course you can use specific and every time designate the newest lot(s). – dave_thompson_085 Jun 12 '16 at 16:06
  • @dave_thompson_085 I still have that option at Fidelity, along with 10 others. – Craig W Jun 13 '16 at 0:00

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