Tax Bills

[pb4uski]

Of course. But you can buy a new set of shares at a different broker, and then sell whichever group has the higher basis later by choosing which brokerage has those shares.

And run the risk of tax fraud when they select you for an tax audit? Sorry, I'll pass.

 

[catotx]

I'm not sure how the FIFO, no SpecID, thing would work in practice. It seems you could shift assets between brokerages, so no brokerage could know your when all purchases were made, so they practically couldn't report for FIFO.

I think this would be similar to the way wash sales are tracked. If your wash sale is in the same account, that broker will report it. But if it happens in a different firm, that firm wouldn't know. It's up to you to report it; if you don't, you might be found out in an audit.

 

[catotx]

If anyone is starting a DAF or donating shares to charity, it should be done this year, so that you can

1) qualify for better deduction, and
2) pick the specific lot to denote while we still have specific ID selection.

 

[catotx]

Does anyone consider going back to using mutual funds (instead of mutual funds) so that you can use the average cost basis method of accounting?

 

[pb4uski]

Another analysis: https://www.pwc.com/us/en/tax-servi...ith-amendments.pdf?elq_mid=9102&elq_cid=40982

Table comparing the bills and current law towards the end and links to the Senate-passed bill (but not searchable).

 

[JDARNELL]

From what I can tell for us it is about a wash but there are a few things.

EE savings bonds tax free for college will go away in 2018. Will go ahead and liquidate the remaining ones this month.
New Rental properties can be depreciated over 25 yrs vs the current 27.5
American Opportunity Credit tacks on a 5th year with 1250 credit max. That will help pay partial for an extra semester of college.

 

[audreyh1]

And run the risk of tax fraud when they select you for an tax audit? Sorry, I'll pass.

If you sell from one brokerage how could they claim you sold the stocks at another? This is just nuts.

 

[gayl]

EE savings bonds tax free for college will go away in 2018. Will go ahead and liquidate the remaining ones this month.

oops!! Wonder if I should give them to the kid now or on graduation? He's on track to owe up to 11k and thought that would make a nice pymt (he has no idea I have them & I have no idea how to tell him to redeem them -- guess that's 2 questions )

 

[GrayHare]

If you sell from one brokerage how could they claim you sold the stocks at another? This is just nuts.

Interesting issue. If all shares spread across different accounts are considered for FIFO purposes, it can wreck the cost basis tracking done by brokerages.

 

[4legsgood]

... EE savings bonds tax free for college will go away in 2018.

So much for best laid plans. Good reminder that laws could change for withdrawing from IRAs for example.

 

[43210]

Interesting issue. If all shares spread across different accounts are considered for FIFO purposes, it can wreck the cost basis tracking done by brokerages.

Exactly what I was getting at.

 

[JoeWras]

Interesting issue. If all shares spread across different accounts are considered for FIFO purposes, it can wreck the cost basis tracking done by brokerages.

A similar issue exists today in a few places:
- Roth 5 year rule. Clock ticks at the first contribution of any Roth in your name. Open another Roth account at a different broker, they won't get that memo.
- IRA basis for after-tax contributions. Your pro-rata share may extend among many brokerages.

Etc. Not a new problem, but, yeah, may be more complex for the FIFO situation.

 

[JDARNELL]

So much for best laid plans. Good reminder that laws could change for withdrawing from IRAs for example.

The good thing is Congress is as slow as molasses so we have some time to adjust. It seems like nothing comes out of the blue.

 

[bingybear]

Interesting issue. If all shares spread across different accounts are considered for FIFO purposes, it can wreck the cost basis tracking done by brokerages.

yes. But it is the taxpayer's responsibility to do the right thing. They may not be able to tell at the time if you sold correct shares. But they could follow you over time and if older shares were sold later, they could audit you ever beyond the normal 3 years. In cases of fraud they can go back as far as they need.

Likely not worth the risk.

I'm reading too many conflicting things on this FIFO stuff. I need to wait until this is finalized to determine what is really involved in the FIFO rules.

 

[GrayHare]

Re FIFO, there's also the issue of stock holdings of which some shares have already been sold at average cost basis. Not easy to go back to FIFO for such holdings. If this change to FIFO transpires, it seems like added complexity for little tax revenue difference.

 

[audreyh1]

Interesting issue. If all shares spread across different accounts are considered for FIFO purposes, it can wreck the cost basis tracking done by brokerages.

Yep.

 

[audreyh1]

Re FIFO, there's also the issue of stock holdings of which some shares have already been sold at average cost basis. Not easy to go back to FIFO for such holdings. If this change to FIFO transpires, it seems like added complexity for little tax revenue difference.

Average cost basis will be allowed for mutual funds last I heard.

 

[bingybear]

Re FIFO, there's also the issue of stock holdings of which some shares have already been sold at average cost basis. Not easy to go back to FIFO for such holdings. If this change to FIFO transpires, it seems like added complexity for little tax revenue difference.

I've not heard of stock being sold based on average basis.

 

[audreyh1]

Hmmm, that's a really good idea. I've been lazy in my gifting and just do it from my checking account or credit card. I'm taking a large LTCG this year, maybe I should put some of that in a DAF and disburse it over a few years. That shouldn't be too hard to set up in the next 3 weeks, should it? I'd probably use VG since that's where my account and the fund I'm liquidating is. I'm going to check it out.

You can do it pretty quickly, but best to set it up very soon. You should look up the specific deadlines for the DFA company you are considering. Donating appreciated stock/mutual fund shares is easiest and quickest if the DFA is managed by the same company.

Fidelity has lower initial opening donation and subsequent donations than Vanguard as well as lower minimum donations to charities. So that might be a consideration. But if you can open with $25K and and don’t mind the $500 min charitable donation you might be OK with Vanguard.

 

[Senator]

Re FIFO, there's also the issue of stock holdings of which some shares have already been sold at average cost basis. Not easy to go back to FIFO for such holdings. If this change to FIFO transpires, it seems like added complexity for little tax revenue difference.

And after many years of dividends being reinvested, across different brokerages, even more difficult.

 

[43210]

529 Plans: can be used for tuition at private K-12 schools

Actually it's "an amendment to the Senate’s tax reform bill that seeks to expand 529 College Savings Plans to include K-12 elementary and secondary school tuition for public, private, and religious schools, including K-12 educational expenses for homeschool students."

So it's all K-12 education types (and still college too, of course).

 

[Bryan Barnfellow]

Looks like chained CPI rears its ugly head:

Individual –standard deduction
CURRENT:
$6,500 for single filers/
$13,000 joint filers (2018)

HOUSE BILL:
$12,200 for single filers/ $24,400 joint
returns (adjusted for inflation based on
chained CPI)

SENATE BILL:
$12,000 for single filers/
$24,000 joint returns
(adjusted for inflation
based on chained CPI).
Increased deduction
sunsets after 2025.
Chained CPI does not
expire after 2025.

-BB

 

[audreyh1]

I've not heard of stock being sold based on average basis.

No. Only mutual funds.

 

[audreyh1]

The whole FIFO thing limited to the retail investor will only save 0.17% of the 10 year tax revenue drop according to the JCT scoring, so why force this complexity that would have to be implemented starting Jan 1 2018 for such a tiny result?

BTW I read that after the 1986 increase in cap gains rates, realized gains seriously dropped and revenue from that activity came in far less than expected.

 

[LOL!]

I think the reason the FIFO thing hasn't been in the news is that it does not apply to retail investors like us even for stocks and ETFs since we all use brokerages that keep track of things. That is, all our investments are held at RICs - regulated investment companies.

As way of seeing this, when one fills out Form 1116 to get the Foreign Tax Credit, one can use "RIC" and does use "RIC" for ETFs, mutual funds, stocks at a broker, etc:

You don't need to report income
passed through from a mutual
fund or other regulated
investment company (RIC) on a
country-by-country basis. Total all
income, in the applicable category,
passed through from the mutual fund or
other RIC and enter the total in a single
column in Part I. Enter “RIC” on line g.
Total all foreign taxes passed through
and enter the total on a single line in
Part II for the applicable category.