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Financial Planning / Tax Strategies


Subject:  Re: Stock sales cost basis Date:  4/16/2008  5:40 PM
Author:  Wradical Number:  100445 of 127613

Just out of curiosity, is there any case where there is an advantage using the FIFO method? Seems like Last IN First OUT would alway be tax advantageous?



You're assuming that stocks always go up.

If you're selling a stock that has gone down over time, and you have bought multiple lots, your oldest shares (i.e., FIFO method,) will give you the biggest capital loss for tax purposes.

By electing specific ID of shares sold, you can use the cost of most recent purchases (i.e., the equivalent of LIFO), to make your loss short-term; the trade-off is that your loss probably won't be as large, for shares held a shorter period of time.

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