Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (8) | Ignore Thread Prev Thread | Next Thread
Author: 4aapl Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 120826  
Subject: Specifying stock update? Date: 7/8/1999 4:29 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
In the near future I plan to sell part of my stock holdings in a stock, which I have bought on several occasions. The exact amount of shares that I want to sell is still in the air, but I want to sell the shares I have sold for over a year first, and then go onto the ones that I have bought most recently.

Today I read up on this in the Tax FAQ, at the IRS site, on the previous threads relating to this or FIFO, and finally the info at fairmark.com. From all of this it looks like there is a lot of uncertainty about this, mainly since while the code says one thing the enforcers are a little more lineant. It also looks like the brokers haven't exactly been cooporative (I'm with Datek, though opening an account with E*Trade for some possible smaller time IPO action).

I just wanted to see if there have been any changes that have happened lately, as far as cases that have occured. (it doesn't look like the code has changed, but if e-mail is now acceptable form of accknowledgement from the broker that would make life a little easier).

Currently, my plan is to talk to a customer rep at Datek, fax or e-mail them a copy of my plan for what order to sell the shares, and then have them acknowledge it (sign it?) and snail-mail it to me (would faxing it to me be enough???). This should be enough to cover me most of the way. (I would include to disregard this plan after a certain date, so that I could update it once my next shares "mature")

Of course to cover myself the rest of the way I would like to follow the suggestion on fairmark.com about sending an e-mail right after placing a sell order, and having them acknowledge that...but I think that is going to take a little more encouraging of the customer rep (to get this done everytime for me, instead of a one time thing).

Are there any thoughts or latest news on this? Any help directly or from another site would be appreciated. TIA

Aaron

(Due to wanting to sell my "matured" stock first I can't just give a blanket statement of "sell my most rescent position" or "sell the ones with the highest basis" as others have done...though giving them my plan would be the same thing in my eyes. The big question is whether either of these would stang up in court. They should IMHO, but I would rather be on completely solid ground)
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post Back To Top
Author: Bob78164 Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 17054 of 120826
Subject: Re: Specifying stock update? Date: 7/8/1999 1:49 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
4aapl writes (in part):

I would include to disregard this plan after a certain date, so that I could update it once my next shares "mature."

I reply:

I suggest the following language: "Sell the shares with the highest basis among those that were purchased more than a year before the sale. If all of these shares are exhausted, sell the remaining shares with the highest basis." That should cover you on an ongoing basis, unless you have some short-term losses that you'd like to realize before the long-term gains. --Bob

Print the post Back To Top
Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 17072 of 120826
Subject: Re: Specifying stock update? Date: 7/8/1999 10:10 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
[[ I just wanted to see if there have been any changes that have happened lately, as
far as cases that have occured. (it doesn't look like the code has changed, but if
e-mail is now acceptable form of accknowledgement from the broker that would
make life a little easier).]]

Nope...one of the issues leading to the confusion is the lack of "on point" court cases on this issue. My guess is that it's not worth litigating over, unless it is simply an anciliary issue to another more major issue that the taxpayer/government want to litigate. But there is nothing new that I know of.

But there WAS a post just recently where one of our readers reminded a discount broker of their obligations under the IRS regulations, and the broker complied, providing the reader with the confirmation necessary to specify the desired stock. So it is certainly possible.

I think this post hit about 2-3 weeks ago. So you might want to go back and check it out.

[[ Currently, my plan is to talk to a customer rep at Datek, fax or e-mail them a
copy of my plan for what order to sell the shares, and then have them
acknowledge it (sign it?) and snail-mail it to me (would faxing it to me be
enough???). This should be enough to cover me most of the way.]]

I would generally agree. Signing it as executed with the appropriate time/date and sending it back to you (either via snail mail or fax) should meet the requirements of the regulations.

[[ (I would
include to disregard this plan after a certain date, so that I could update it once
my next shares "mature")]]

If you can get the broker to "sign off" and give you a confirmation each and every time to sell comingled shares, I'm not sure that you need a "plan"...simply a confirmation each time you make a trade that would require confirmation.

[[ Of course to cover myself the rest of the way I would like to follow the
suggestion on fairmark.com about sending an e-mail right after placing a sell
order, and having them acknowledge that...but I think that is going to take a little
more encouraging of the customer rep (to get this done everytime for me, instead
of a one time thing).]]

But nobody said that the best things in life come easy. If you want to make sure that you are 100% safe, this is a good way to go. If you are happy with something less than 100%, that's your decision.

[[ Are there any thoughts or latest news on this? Any help directly or from another
site would be appreciated. TIA]]

Again, the only thing that I would suggest is to go back and read the prior posts on this issue to gleen some additional information.

[[ (Due to wanting to sell my "matured" stock first I can't just give a blanket
statement of "sell my most rescent position" or "sell the ones with the highest
basis" as others have done...though giving them my plan would be the same thing
in my eyes. The big question is whether either of these would stang up in court.
They should IMHO, but I would rather be on completely solid ground)]]

Only the COURT would be able to answer that question. Remember...I thought OJ was guilty...but the court disagreed. Shows you what I know.

Hope this helps...
TMF Taxes
Roy

Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post Back To Top
Author: 4aapl Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 17095 of 120826
Subject: Re: Specifying stock update? Date: 7/9/1999 2:41 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Thanks for following up on the post. I believe I already read all the previous posts on this topic. I plan to call up Customer Support tomorrow morning and attempt to clear this up...so far 2 e-mails have only resulted in them saying

"It is not possible to specify which block of shares you wish to sell first. However we will provide you with the appropriate forms at the end of the year so you can then dicuss this information with your accountant and then decide with him."

but as the rules seem to say, Datek doesn't need to actually sell these shares, all they need to do so I can be legal or in safe harbour is acknowledge receiving my instructions, in paper format so that I have a paper trail.

If anything major comes about I'll let the board know, but at this time I expect to have to talk to a supervisor or 2 but to find way for them to do this.

On a side note, past messages and fairmark.com appear to have conflicting reports on whether specifying stock can be done after part of the shares have been sold....ie if I had 1000 shares, sold 200 of them a month ago, and now want to sell another chunk. It appears to me that fairmark.com says you just have to assume FIFO for the first chunk of 200 that you didn't specify, but that you can specify instructions for further shares. Past messages on this board contradict that and say if you've already sold part of a position with out specifying, that you can't specify anything else in this position until you have completely cleared your position of this stock and start fresh.

At this time I haven't sold any of the shares I have accumulated over the last 18 months (in AAPL if you couldn't guess by my user name :) ....but I'm sure it would be helpful to me and others in the future if there is a definitive answer (I didn't see anything on this on the IRS stuff in 550 (I think that was it)...but I didn't read the whole thing and it is a very long document, so I might not remember it or just missed it)

Aaron

Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post Back To Top
Author: Bob78164 Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 17107 of 120826
Subject: Re: Specifying stock update? Date: 7/9/1999 1:28 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
4aapl writes (in part):

On a side note, past messages and fairmark.com appear to have conflicting reports on whether specifying stock can be done after part of the shares have been sold....ie if I had 1000 shares, sold 200 of them a month ago, and now want to sell another chunk. It appears to me that fairmark.com says you just have to assume FIFO for the first chunk of 200 that you didn't specify, but that you can specify instructions for further shares. Past messages on this board contradict that and say if you've already sold part of a position with out specifying, that you can't specify anything else in this position until you have completely cleared your position of this stock and start fresh.

I reply:

Ahem, yes, I believe that many of those messages were mine. I also believe that they were mistaken. That is the rule for mutual funds, but (especially since Kaye Thomas is a tax attorney) I also believe what I read on www.fairmark.com . I'm pretty sure that TMFTaxes, also, has cleared up this issue, but a little extra pruning never hurts. --Bob

Print the post Back To Top
Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 17118 of 120826
Subject: Re: Specifying stock update? Date: 7/9/1999 7:31 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
[[ "It is not possible to specify which block of shares you wish to sell first.
However we will provide you with the appropriate forms at the end of the year
so you can then dicuss this information with your accountant and then decide
with him."]]

Well..that just doesn't make it according to the IRS rules and regulations. I remember not too long back that one of the discount brokers actually complied with the regulations. If this issue is that important to you, you might want to look back, see who it was, and consider changing brokers.

[[ but as the rules seem to say, Datek doesn't need to actually sell these shares, all
they need to do so I can be legal or in safe harbour is acknowledge receiving my
instructions, in paper format so that I have a paper trail.]]

That is the various interpretation of the rules...maybe right...maybe wrong. But the rules themselves are very clear: you need specific confirmation. So you have to decide just how much wiggle room you are willing to live with.

[[ If anything major comes about I'll let the board know, but at this time I expect to
have to talk to a supervisor or 2 but to find way for them to do this.]]

And you might want to go into the meeting with the appropriate section of IRS Publication 550 in your hands to tell them what THEIR responsibility is with respect to the transaction.

Now, then...they may tell you: "If you want all of this service...go to a full service broker. If you want discount, stay with us and get what we give you and shut up. And deal with your tax issues any way you want to and leave us out of it". That may certainly be an appropriate answer. And then the ball will be back in your court as to what you want to do.

[[ (I
didn't see anything on this on the IRS stuff in 550 (I think that was it)...but I
didn't read the whole thing and it is a very long document, so I might not
remember it or just missed it)]]

It's important when reading tax related documents to read the whole thing. Tax law isn't like a short story where you can read the first 2 pages and the last page and get the jist of the story. It would seem that if this issue is important to you, you would take the time to read all there is to read about it...especially what is written by the IRS.

But, just to help you out, here is the important passages that you'll find in IRS Publication 550 (if you decide to read the whole thing):

Identifying stock or bonds sold. If you can adequately identify the shares of stock or the bonds you sold, their basis is the cost or other basis of the particular shares of stock or bonds.

Identification not possible. If you buy and sell securities at various times in varying quantities and you cannot adequately identify the shares you sell, the basis of the securities you sell is the basis of the securities you acquired first. Except for certain mutual fund shares, discussed later, you cannot use the average price per share to figure gain or loss on the sale of the shares.

Example. You bought 100 shares of stock of XYZ Corporation in 1984 for $10 a share. In January 1985, you bought another 200 shares for $11 a share. In July 1985, you gave your son 50 shares. In December 1987, you bought 100 shares for $9 a share. In April 1998, you sold 130 shares. You cannot identify the shares you disposed of, so you must use the stock you acquired first to figure the basis. The shares of stock you gave your son had a basis of $500 (50 X $10). You figure the basis of the 130 shares of stock you sold in 1998 as follows:

50 shares (50 X $10) balance of stock
bought in 1984 $500
80 shares (80 X $11) stock bought in
January 1985 880
Total basis of stock sold in 1998 $1,380

Adequate identification. You will make an adequate identification if you show that certificates representing shares of stock from a lot that you bought on a certain date or for a certain price were delivered to your broker or other agent.

Broker holds stock. If you have left the stock certificates with your broker or other agent, you will make an adequate identification if you:

1) Tell your broker or other agent the particular stock to be sold or transferred at the time of the sale or transfer, and

2) Receive a written confirmation of this from your broker or other agent within a reasonable time.

Single stock certificate. If you bought stock in different lots at different times and you hold a single stock certificate for this stock, you will make an adequate identification if you:

1) Tell your broker or other agent the particular stock to be sold or transferred when you deliver the certificate to your broker or other agent, and

2) Receive a written confirmation of this from your broker or other agent within a reasonable time.

Stock identified this way is the stock sold or transferred even if stock certificates from a different lot are delivered to the broker or other agent.

If you sell part of the stock represented by a single certificate directly to the buyer instead of through a broker, you will make an adequate identification if you keep a written record of the particular stock that you intend to sell.

Bonds. These methods of identification also apply to bonds sold or transferred.

Hope this helps...
TMF Taxes
Roy

Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post Back To Top
Author: 4aapl Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 17145 of 120826
Subject: Re: Specifying stock update? Date: 7/10/1999 12:49 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
First, thanks for your helpful responses. As I said in the other thread it is great to do my research and then get the same answer from someone else. Makes it at least feel like you have the idea under your belt :)

[[It's important when reading tax related documents to read the whole thing. Tax law isn't like a short story where you can read the first 2 pages and the last page and get the jist of the story. It would seem that if this issue is important to you, you would take the time to read all there is to read about it...especially what is written by the IRS.]]

It looks like the post that I thought was 100% clear turned out not to be.

I read all the IRS stuff in 550 on specifying stock that I could find, including everything you quoted along with a couple of references here and there. What I don't remember seeing, possibly because I wasn't looking for it at the time, was anything on if I sold part of my holdings without worrying about specifying, but then wanted to specify in the future.

fairmark.com says that is fine, but posts by you and Bob in the past have said otherwise. Infact, I think it might say otherwise in the FAQ. It was this that I didn't remember seeing anything on in 550, but I also wasn't looking for it because I have yet to sell any of my shares and so can just specify everything.

But Bob just wrote in and said he had been confused before, and that this "rule" is not for stocks...so my question has been answered (but do you agree with that. I'll search through the FAQ and see if it is wrong there if you do agree on this)

Aaron

Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post Back To Top
Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 17264 of 120826
Subject: Re: Specifying stock update? Date: 7/13/1999 7:14 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
[[fairmark.com says that is fine, but posts by you and Bob in the past have said
otherwise. Infact, I think it might say otherwise in the FAQ. It was this that I
didn't remember seeing anything on in 550, but I also wasn't looking for it
because I have yet to sell any of my shares and so can just specify everything.]]

Let me just say this: I don't necessarily disagree with what Kaye has to say in his site. But I'm not sure, because of the lack of case law, that he is 100% correct. Heck, I'm not even sure that the system that I use is 100% correct. But I'm reasonably comfortable with it. I believe that Kaye is more agressive on this issue than I am. Nothing wrong with that. But if you are looking for 100% clarity on this issue, you'll either have to follow the IRS guidelines, or sell all of your stocks and simply buy savings bonds. I can't give you the 100% answer that I'm afraid that you looking for.

[[ But Bob just wrote in and said he had been confused before, and that this "rule"
is not for stocks...so my question has been answered (but do you agree with
that. I'll search through the FAQ and see if it is wrong there if you do agree on
this)]]

All I can tell you is that the quote that I gave you came directly from Pub 550. And that statement basically follows the regulation on this issue. So the IRS position (at least publicly) is clear. I have represented clients in audit that have used different methods, and those methods were "passed" on by the IRS...because the dollars involved weren't worth fighting over. But simply because the IRS overlooks something in audit doesn't mean that they are giving their approval one way or another.

So you'll just have to read everything that you can on the issue and take your best shot. If you like Kaye's method...use it. Just know that it may not be 100% correct.

Again, if you want 100%, follow the IRS guidelines.

TMF Taxes
Roy

Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post Back To Top
UnThreaded | Threaded | Whole Thread (8) | Ignore Thread Prev Thread | Next Thread
Advertisement