Originally Posted by pb4uski
One thing to be sure of is that your basis and Vanguard's basis are the same before proceeding. Because I use average cost across covered and uncovered shares, for a few tickers my basis differs from Vanguard's so I'll have parallel records in Quicken that differ from Vanguard until all my uncovered shares have been sold. After that, once all the shares are covered shares they should align.
But you've only sold uncovered shares, and you've used the "average cost" basis for them, right? Say you changed to Spec ID right now as far as Vanguard was concerned. I think
Vanguard won't be reporting any cost basis to the IRS for sales of your uncovered sales, they'll send you a 1099-B at tax time with the cost basis of these uncovered shares that assumes they were sold using the average cost basis. That's what I'll report to the IRS, since that's the cost basis I've historically used for these uncovered shares. But, as I understand it
, if you also want to sell some (recently purchased, higher cost basis) >covered< shares today using the Spec ID method to tax loss harvest, you can do that, too, and the 109-B VGD sends to the IRS (and you) on these shares will be accurate reflections of the prices you paid for those exact shares.
As a backup I'll record a "snapshot" of the average cost basis of my uncovered shares in all my taxable funds as of today. That'll be the share price I'll continue to use going forward when I specifically identify these uncovered shares for sale in the future.
This use of different cost basis methods (separate for covered and uncovered shares) appears to be countenanced by IRS rules.
As usual, everyone should do their own research and consult a professional. I'm a random guy on the interwebs with no particular expertise in this stuff.