Tax Lot ID Method?

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MarathonInvestor313
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Joined: Sat Apr 14, 2018 6:23 pm

Tax Lot ID Method?

Post by MarathonInvestor313 » Sun Apr 15, 2018 3:22 pm

My husband and I have been dual income earners for the past 25 years. I recently retired and my husband still works and upon reviewing our account fees at Edward Jones, we (he) decided I would manage our portfolio. After reviewing our mismanaged high cost portfolio, I transferred everything to TD Ameritrade (Scottrade) as that was where I had a small trading account. Now I need to sell all those high cost funds but do not know what method to use. Our 2017 reported gross income was $300,000+. Looking for some recommendations as to the methodology to use considering the life of these funds. FIFO? LIFO? Highest Cost? Lowest Cost? Tax Efficient Loss Harvester? I have tried to pull up reports from EJ but they don't go back as far as I need and we reinvested dividends. What method of sale do you recommend for tax efficiency based on the lack of data? Thank you in advance for your help.
-Nurse turned newbie portfolio manager.

PFInterest
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Joined: Sun Jan 08, 2017 12:25 pm

Re: Tax Lot ID Method?

Post by PFInterest » Sun Apr 15, 2018 3:35 pm

For taxable, specific lot ID is usually the best.

MarathonInvestor313
Posts: 5
Joined: Sat Apr 14, 2018 6:23 pm

Re: Tax Lot ID Method?

Post by MarathonInvestor313 » Sun Apr 15, 2018 3:39 pm

These are all after tax.

MarathonInvestor313
Posts: 5
Joined: Sat Apr 14, 2018 6:23 pm

Re: Tax Lot ID Method?

Post by MarathonInvestor313 » Sun Apr 15, 2018 3:40 pm

I do not have specific tax ID lots.

livesoft
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Re: Tax Lot ID Method?

Post by livesoft » Sun Apr 15, 2018 3:46 pm

MarathonInvestor313 wrote:
Sun Apr 15, 2018 3:40 pm
I do not have specific tax ID lots.
Without these, then LIFO, HIFO, Highest Cost, Lowest Cost will not be possible. Everything will probably be Average Cost which also forces FIFO.
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dbr
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Re: Tax Lot ID Method?

Post by dbr » Sun Apr 15, 2018 3:49 pm

If you are selling the entirety of the holding in the same year the basis method does not matter as it would all come out to the same answer. This is assuming there have not been previous sales. If you want to sell in different years it would make sense to select lots to sell in the different years.

The first question is whether there are any reports that list your cost basis, at least average.

If you have no information regarding your purchase prices you are going to somehow try to reconstruct estimates. Otherwise the default is basis is zero.

MarathonInvestor313
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Joined: Sat Apr 14, 2018 6:23 pm

Re: Tax Lot ID Method?

Post by MarathonInvestor313 » Sun Apr 15, 2018 4:28 pm

We have contacted our EJ rep, let's see what happens.

aristotelian
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Re: Tax Lot ID Method?

Post by aristotelian » Sun Apr 15, 2018 4:35 pm

If you are committed to selling the entire position, it doesn't really matter what method you use. Eventually you will realize the entire gain.

Generally with shares that have been held a long time, FIFO would give you the highest tax hit. I have some old mutual funds without complete info, so average cost is my only option.

Nutmeg
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Joined: Wed Jul 26, 2017 12:52 pm

Re: Tax Lot ID Method?

Post by Nutmeg » Sun Apr 15, 2018 7:44 pm

MarathonInvestor313 wrote:
Sun Apr 15, 2018 3:40 pm
I do not have specific tax ID lots.
Even if you don’t have this information already, it might be possible to construct a chart of information as to the cost basis for each acquisition date using your statements and publicly-available information. I have done this for shares owned by a relative who has named me as attorney-in-fact under a power of attorney. For example, if you made an initial investment of $10,000 on February 1, 2000, and the share price was $5.00 per share, the cost basis for the shares acquired on that date was $5.00 per share. Each time dividends were paid, you received a specific number of shares at a specific price, and that price is the cost basis for those specific shares.

One strategy to reduce taxes is to make charitable contributions that you would have made anyway using appreciated securities instead of cash. If you use the specific identification method, you can choose to donate the securities with the highest gain.

MarathonInvestor313
Posts: 5
Joined: Sat Apr 14, 2018 6:23 pm

Re: Tax Lot ID Method?

Post by MarathonInvestor313 » Mon Apr 16, 2018 3:30 pm

I truly appreciate everyone's guidance. I have learned so much today. After separating funds into the appropriate tax accounts I found only 6 funds that need to be placed into tax lots prior to sale. Evidently, TDA has not received all the information from EJ and the process could take a couple more weeks to finalize. I'm going to print my account statements from EJ prior to them closing my online accounts to keep track of everything. This process is nerve wracking. I'm afraid I might miss something.

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