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Hi,

First of all, my apologies if I'm repeating a question someone asked 5 minutes ago -- I'm in a bit of a bind and my server is kind of slow, so I'm unable to search through past messages at this time.

I was reading the "Specific Identification of Stock" article on the Fool and wanted to do that with some stock I own. When I called up Datek, however, the CSR told me that a written confirmation from my broker is not necessary -- Datek would simply share sells from my account and it was up to me to later specify which stock I sold.

Can anyone inform me as to whether his statement is correct? If not, how can I specify stock if Datek will not provide written confirmation of my instructions?

Thanks for your help.

Mike
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mcl1234 writes (in part):

I was reading the "Specific Identification of Stock" article on the Fool and wanted to do that with some stock I own. When I called up Datek, however, the CSR told me that a written confirmation from my broker is not necessary -- Datek would simply share sells from my account and it was up to me to later specify which stock I sold.

I reply:

The Datek customer service representative is emphatically NOT correct. You must specifically identify stock before you sell it. The only way to be certain that the IRS won't successfully challenge your identification is to receive the broker's confirmation. Climb the ladder at Datek until you find someone who knows what he or she is talking about. For your information, and that of your broker, you might also check out www.fairmark.com , which contains instructions written for the broker on how to specifically identify stock. Good luck! --Bob
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If audited and forced to use FIFO (due to not specifying), am I correct in assuming that I would only have to pay the difference in the cap gains paid plus interest (~7%)?

volchris
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I was reading the "Specific Identification of Stock" article on the Fool and wanted to do that with some stock I own. When I called up Datek, however, the CSR told me that a written confirmation from my broker is not necessary -- Datek would simply share sells from my account and it was up to me to later specify which stock I sold.

Can anyone inform me as to whether his statement is correct? If not, how can I specify stock if Datek will not provide written confirmation of my instructions?

============

I would send a letter with my request to Datek with a place for them to sign acknowleding the request along with a self addressed postage paid envelope to you.

See if you can send it to a specific person's attention for them to acknowledge.

Pete
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<<If audited and forced to use FIFO (due to not specifying), am I correct in assuming that I would only have to pay the difference in the cap gains paid plus interest (~7%)?>>

In simple terms, yes.

But that additional income would certainly impact your AGI...which might also impact the many things that are restricted or limited due to your AGI...

Such as (taking a deep breath)...

Itemized deduction limitation, exemption limitations, Roth contribution/conversion limitations, traditional IRA deductible contribution limitations, real estate passive loss limitations, taxability of social security benefits limitation, and many other things.

So it's not as easy as you might think...
TMF Taxes
Roy
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<< I was reading the "Specific Identification of Stock" article on the Fool and wanted to do that with some stock I own. When I called up Datek, however, the CSR told me that a written confirmation from my broker is not necessary -- Datek would simply share sells from my account and it was up to me to later specify which stock I sold.

Can anyone inform me as to whether his statement is correct? If not, how can I specify stock if Datek will not provide written confirmation of my instructions? >>

As has already been pointed out to you, the CSR was wrong. I'll only add that the IRS really needs to get the specific identification Reg updated to reflect today's investing environment. It seems to me that there ought to be a way for an exchange of e-mails or some sort of electronic identification to be possible. (Brokers could also get in the game, perhaps rigging up a system and charging extra for the service.

In any case, the IRS should look into this. They have an official called the Taxpayer Advocate. One of his jobs is to make recommendations to the agency for changes that will make life easier for the taxpayers. He also reports to Congress annually about problems that taxpayers are encountering.

Now if enough people wrote to the

Taxpayer Advocate
Internal Revenue Service
1111 Constitution Ave NW
Washington, DC 20224

with cc's to their members of Congress, IRS might update the Reg.

Phil Marti
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pmarti:
It seems to me that there ought to be a way for an exchange of e-mails or some sort of electronic identification to be possible. (Brokers could also get in the game, perhaps rigging up a system and charging extra for the service.

I totally agree about this. The brokers wouldn't even have to charge extra. It would be so easy for all on-line brokers to have a little window where the customer could type "sold lot of 200 sh. purchased 2/3/99" (for example). This statement could then automatically be printed on the trade confirmation. I'm not sure whether that would *legally* be acceptable under the IRS rules, but it would certainly be a step in the right direction.

I checked out the American Express brokerage site the other day. It appears that when you sell shares on their site you are offered a menu where you can choose FIFO, LIFO, etc. I've also been told that E*Trade offers a similar function. Can anyone verify, and let us know how well these work?

I've actually made some headway with representatives at Ameritrade, after several failed attempts at explaining the rules. They have been sending me confirmations of shares specified, when I request them.

Someone mentioned the Fairmark site. Here is the URL for "Identifying Shares: What Brokers Need to Know":
http://www.fairmark.com/buystock/broident.htm

fatcity
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I checked out the American Express brokerage site the other day. It appears that when you sell shares on their site you are offered a menu where you can choose FIFO, LIFO, etc. I've also been told that E*Trade offers a similar function. Can anyone verify, and let us know how well these work?

E*Trade has a page that comes up after you input a sell order. It asks which lot you would like to select from (it has them all listed, so you click on one). If the chosen lot does not contain the total number of shares you are selling, they will ask again from the remaining lots. It really is nice. Unfortunately, I switched to Brown and no longer have this option.

volchris
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I've been reading a lot of messages about "specific identification of shares" and I want to ask this:

Can the IRS detect that you are reporting incorrect specific shares that you sold?? I believe they only get the "sales info" the same as on the 1099 forms. Or do they get info about "what shares were sold" somehow from your broker?

I'm wondering... I can save quite a bit if I allocate shares sold for a stock beginning with the shares I bought in Feb 1999, rather than the FIFO shares bought Nov 1998. If I list the shares sold and bought beginning with Feb 1999 purchased shares I can show everthing this year in chronological date order (both purchases and sales) and possibly not trigger any questions. Then next year I can report the shares bought in Nov 1998 (which I just sold) as "long term gains". Also, I can avoid having to report wash sales in 1999 for this stock which would not defer some hefty losses until 2000.

Question is: if I am not audited for anything else, will "something" trigger the IRS to question my specific share identifications? Is it "likely" that when I report the long-term gains next year (2000) for this stock, their system will "notice" that I'm reporting shares purchased "earlier" than I reported purchasing last year (1999). Could this kick off an audit? It would be legal if I notified my broker, but I didn't and the shares sold this year were sold by the broker due to a margin call. I had no control over the sale they executed.

Thank you for any opinions!
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