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I bought 50 shares of stock A @ $50.00/share in April 1999. I then bought 50 shares of stock A @ $30.00/share in April of 2000. My cost basis is now $40.00/share. Stock A is now selling @ close to $40.00/share. Is it possible to sell the first 50 shares @ $40.00 (first in-first out, and take the $500.00 loss as a long term capital loss? If so, how do I document this for IRS?

Thanks in advance
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I bought 50 shares of stock A @ $50.00/share in April 1999. I then bought 50 shares of stock A @ $30.00/share in April of 2000. My cost basis is now $40.00/share.
Stock A is now selling @ close to $40.00/share. Is it possible to sell the first 50 shares @ $40.00 (first in-first out, and take the $500.00 loss as a long term capital loss? If so, how do I document this for IRS?


This is simple enough that even I can answer. <g>

Yes, you can sell the first batch and take a long term capital loss because:

1. It's been over 1 year since the first purchase
2. It's been over 30 days since the second purchase
3. It's a simple First in First out deal

For the IRS, you just record it in your schedule D as one transaction (corresponding to the one sale)

Sale Proceeds = 50*40 = 2000 less commission
Cost basis = 50*50 = 2500 plus commission

As it turns out, you'll probably be able to take more than $500 capital gains loss after factoring in the commissions.

/sseth

p.s. For stocks, you do not average your cost basis for tax purposes. Each lot stands on its own.
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