Do I have to specify to my broker which specific shares to sell in order to use the Specific Lot method to determine cost basis for mutual funds? Do I need confirmation from my broker?
You are referring to meeting the requirement for “adequate identification.” If you can definitively identify the stocks sold, you do not need to use the adequate identification rules. You can use the adjusted basis of those particular shares to figure your gain or loss. The “adequate identification” rules allow you to control which shares are considered sold, even though you may not control which shares are actually sold. If you specify to your broker which shares you want sold prior to or at the time of the sale and they confirm within a reasonable time in writing, then you are considered to be able to “adequately identify” the shares sold, even if the broker actually sells different shares. The confirmation by the mutual fund must be given to you within a reasonable period of time and state that you instructed the broker to sell particular shares of stock. If you cannot identify the specific shares and you do not want to use an average basis, then you must use the first-in first-out
Related Questions
- If I use an average basis method for computing basis of mutual fund shares upon sale, how do I determine the holding period for those shares?
- If I elect to use the average cost method for covered and uncovered shares, how will Vanguard determine which shares are being sold?
- Can i buy and sell shares online without a broker?
