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Jean David...

As far as IRS KNOWING which shares you sold, they dont...unless your return is selected for audit and these issues are questioned. Other than that, IRS has no clue. So if you believe that you are allowed to use the specific identification method, so be it.

As far as the reinvested dividends, that statement also includes capital gains. And if you determine that you are stuck with the FIFO method, those reinvested dividends and capital gains must be taken into account in the order in which they were purchased. Obviously, should you decide that you are allowed to use the specific identification method, you will also be required to specifically identify those reinvested dividend/capital gain shares when they are sold.

I don't see any reason for you to forward any records to me. I agree with you that no real purpose would be served.

The bottom line: The method selected for the original sale is the method that must be used for any subsequent. If it was specific identification for the first sale(s), it must remain specific identification. If FIFO, it must remain FIFO. You are obviously confident in your position that the first shares sold were done using specific identification. So it looks like specific ID it is.

And, yes, it would be lovely if the code could be so simple to fit in a 16-page understandable package. But I'm afraid that you would have a better chance of turning lead into gold.

But I DO agree that the collective congress (for the past 40 years, and especially in the last 20 years) should be VERY ashamed. But remember: confusion is power. And government LOVES power.

Thanks again for your question and follow-up.
TMF Taxes
Roy Lewis

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