Average Basis versus Specific Share ID

[SaveSome]

For those of you taking withdrawals from taxable mutual fund accounts, do you use average cost basis or do you identify specific shares sold? It seems a real advantage to identify specific shares to control gains (or losses ) and not too difficult with a program like Quicken.

IRS Pub. 594 notes that a taxpayer must "[r]eceive confirmation in writing from your broker or other agent within a reasonable time of your specification of the particular shares sold or transferred." Do mutual fund companies generally accommodate this requirement?

Happy Thanksgiving!

[Martha]

Quote:

Originally Posted by SaveSome IRS Pub. 594 notes that a taxpayer must "[r]eceive confirmation in writing from your broker or other agent within a reasonable time of your specification of the particular shares sold or transferred." Do mutual fund companies generally accommodate this requirement? Happy Thanksgiving!

We have not had good experiences in getting confirmation that designated individual shares were sold, despite clear direction to the broker. In our case it was discount brokers.

[Nords]

Quote:

Originally Posted by SaveSome For those of you taking withdrawals from taxable mutual fund accounts, do you use average cost basis or do you identify specific shares sold?* It seems a real advantage to identify specific shares to control gains (or losses ) and not too difficult with a program like Quicken.

Specific shares. I like Quicken's "Minimize Cap Gains" button, although I've stopped checking whether it's doing it right.

A caveat is that once you start identifying specific shares of a fund sale, you have to continue that method for ALL shares of the fund. This can get a bit tedious over the years, especially when you do those six-page Schedules D for selling those years of bi-weekly DCAs. When you buy 'em $400 at a time and sell a $40K chunk a decade later, you're going to do at least 30 or 40 line entries.

Quote:

Originally Posted by SaveSome IRS Pub. 594 notes that a taxpayer must "[r]eceive confirmation in writing from your broker or other agent within a reasonable time of your specification of the particular shares sold or transferred." Do mutual fund companies generally accommodate this requirement?

That's pretty funny! I usually send in a Quicken printout with a cover letter and I used to receive a letter back saying "We don't care." I think that's the "written confirmation".

In the last few years they haven't even bothered to respond and describe the depth of their apathy, but I doubt the IRS has the time or the staff to pursue this rule.

[Martha]

Quote:

Originally Posted by Nords I usually send in a Quicken printout with a cover letter and I used to receive a letter back saying "We don't care." I think that's the "written confirmation". In the last few years they haven't even bothered to respond and describe the depth of their apathy, but I doubt the IRS has the time or the staff to pursue this rule.

I assume they only care in the event of an audit.

[haha]

Quote:

Originally Posted by Martha We have not had good experiences in getting confirmation that designated individual shares were sold, despite clear direction to the broker.* In our case it was discount brokers.*

Fidelity is very good at this. At the time of sale you choose what shares are being sold, and it comes through on your confirmations.

Fidelity uses the designated basis and holding period in their 1099s also.

Ha