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Hi,

I have a question about claiming capital loss from a stock investment. I bought 400 share some stock at $25 13 months ago. I bought another 400 at $18 10 months ago. Now the stock is at $10 and I would like to sell a portion of the 800 shares to claim some loss. I have no other capital gain in my return this year. How do I calculate the cost basis of the stock if, say, I sell 200 shares?

Thanks,

Joe
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<<I have a question about claiming capital loss from a stock investment. I bought 400 share some stock at $25 13 months ago. I bought another 400 at $18 10 months ago. Now the stock is at $10 and I would like to sell a portion of the 800 shares to claim some loss. I have no other capital gain in my return this year. How do I calculate the cost basis of the stock if, say, I sell 200 shares?>>

Unless you specify otherwise, the tax law will assume that the first shares you sell are the first shares you acquired. This is probably the result you want, because your older shares have a higher basis. A sale of 200 shares at $10 will produce the $3,000 loss you're looking for.

If you were in the opposite situation (older shares with lower basis), you would want to identify the shares you are selling. I believe Roy has a FAQ on this issue.

KAT in Chicagoland
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<<I have a question about claiming capital loss from a stock investment. I bought 400 share some
stock at $25 13 months ago. I bought another 400 at $18 10 months ago. Now the stock is at $10
and I would like to sell a portion of the 800 shares to claim some loss. I have no other capital gain
in my return this year. How do I calculate the cost basis of the stock if, say, I sell 200 shares?>>

Joe...

KAT provided you with the "right on" answer in all respects. If, for whatever reason, you DO want to specify the other lower basis ($18) shares, you might be able to do so (but, as KAT points out, I'm not sure why you would want to do so).

Check out my Frequently Asked Question on "Specifying Stock" in the Fools School area and you'll get a flavor for what is involved if you want to specify shares rather than using the FIFO (first in-first out) method.

TMF Taxes
Roy
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<<If, for whatever reason, you DO want to specify the other lower basis ($18) shares, you might be able to do so (but, as KAT points out, I'm not sure why you would want to do so).>>

Might want to generate a short-term loss carryover (the higher basis shares were held long-term). Wouldn't matter for this year because no other gains or losses, but for next year could be better. But the original question indicated only an interest in generating a $3,000 loss for the current year.

KAT in Chicagoland
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<<<If, for whatever reason, you DO want to specify the other lower basis ($18) shares, you might be able to do so (but, as KAT points out, I'm not sure why you would want to do so).>>

Might want to generate a short-term loss carryover (the higher basis shares were held long-term). Wouldn't matter for this year because no other gains or losses, but for next year could be better. But the original question indicated only an interest in generating a $3,000 loss for the current year.?

Similar for me. I wanted to generate a $3000 tax loss, but wanted to raise as much money as possible, so I sold the shares with the lowest capital loss (lowest in terms of absolute value). Later I should be able to sell few shares to get a larger capital loss if I need to.
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