What is the FIFO method?
FIFO stands for “first-in, first out.” You assume that the shares you purchased first are the first ones sold. In the example below, an investor bought 500 shares at $10 each, then 13 months later, an additional 500 shares at $15 each. If the investor sold 500 shares at $20 each and assumed a FIFO cost basis, the gain would be $5,000 ($10,000 sales price less $5,000 original cost). In this instance, using one of the other cost basis methods would have reduced the investor’s tax liability.
Related Questions
- I have used the FIFO method to determine the cost basis for a sale of a portion of a mutual fund holding. Must I continue to use this method for all future sales of this fund?
- I use the first-in, first-out (FIFO) method to report my capital gains. Can I use Franklin Templetons Cost Basis Statement to prepare my taxes?
- How does FIFO compare to the Specific ID Sell Method?
