Quote:
Originally Posted by perinova
Was this topic already covered?
|
Has that ever made a difference on this board? Even if it has this topic is worth repeating.
Quote:
Originally Posted by perinova
Up to now I always have used the average cost method however if I will withdraw on a regular basis there might be advantage of picking the high cost shares first to limit cap-gain taxes? But would that bring very high cap gains much later?
|
Selling specific shares is a real PITA at tax time, as much as I love typing dozens of transactions into a five-page Schedule D. And some sellers are quite concerned about ensuring that they cover their legal asse(t)s regarding the specific-share instructions to your broker/fund company. (I've never been queried about it, nor have I ever heard of anyone being audited on that basis, but the rule is on the books.) And once you start withdrawing shares from a fund using the specific-share method, you're obligated to do so for ALL the shares of that fund. Once you start selling shares from that fund you can't change the method.
Having said that, we've been selling the highest-basis shares first to minimize the cap gains. Someday we may face a higher cap-gains tax bill if we sell the lower-basis shares, but another option would be to withdraw spending money from our Roths (tax-free). If we don't need to use the low-cost shares then we could gift them to our kid, donate them to charity, or just leave them for a stepped-up inheritance basis.
IIRC cap gains drop again in 2008. If those low-basis shares are needed for expenses then that might be a great time to sell.