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Hi all,

I'm about to begin investing and was curious about how the IRS handles purchasing the same stock.


Example:
I purchase 50 shares of CS of NASDAQ:PODD on 1/1/2000 @ $50.00
I purchase 50 shares of CS of NASDAQ:PODD on 2/1/2000 @ $100.00
I purchase 50 shares of CS of NASDAQ:PODD on 3/1/2000 @ $150.00

Assuming that I sold 101 Shares on 4/1/2000 @ $200.00 would I use LIFO or FIFO to calculate my short term capital gains? From my current understanding; the IRS uses FIFO but allows for LIFO if the owner and stockbroker opt for that.

My questions are:

  1. How does one elect for LIFO, if they do not have a stockbroker?
  2. What form would be used for this kind of transaction?
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    Those example dates are oddly old. Also, how do you not have a stockbroker (even if it's a discount broker)? – RonJohn May 9 '17 at 2:14
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    Perhaps by having a seat on the floor of the exchange? but then he would not be asking questions like this and NASDAQ is completely electronic anyway. – misantroop May 9 '17 at 3:41
  • @RonJohn two things, "I'm about to begin" and an example is just that, an example. On top of that, I'm going to use BATs because I find broker fees to be too high. – Liam May 9 '17 at 13:20
  • @Liam "BAT"... British American Tobacco? Border Adjustment Tax? "I find broker fees to be too high" You haven't looked too hard for discount brokerages. – RonJohn May 9 '17 at 13:26
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    @Liam, do you realize that if you get an account at a US discount broker, it's free to sign up and you pay like $4.95 for trades? It doesn't get cheaper than that. I believe Bats is for professionals and brokers only. Even if you are a pro, Bats has some steep monthly fees. – Rocky May 9 '17 at 16:01
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According to the IRS, you must have written confirmation from your broker "or other agent" whenever you sell shares using a method other than FIFO:

Specific share identification. If you adequately identify the shares you sold, you can use the adjusted basis of those particular shares to figure your gain or loss.

You will adequately identify your mutual fund shares, even if you bought the shares in different lots at various prices and times, if you:

  • Specify to your broker or other agent the particular shares to be sold or transferred at the time of the sale or transfer, and

  • Receive confirmation in writing from your broker or other agent within a reasonable time of your specification of the particular shares sold or transferred.

If you don't have a stockbroker, I'm not sure how you even got the shares. If you have an actual stock certificate, then you are selling very specific shares and the purchase date corresponds to the purchase date of those shares represented on the certificate.

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