Selling "non-covered" Vanguard mutual fund shares

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jefmafnl
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Selling "non-covered" Vanguard mutual fund shares

Post by jefmafnl »

When I sell or exchange shares of Vanguard mutual funds purchased in the "bad old days" (before ca. 2012), and I use Specific ID, do I still need to send Vanguard a message specifying shares? Or is keeping my own records enough?

Thanks!

J
livesoft
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Re: Selling "non-covered" Vanguard mutual fund shares

Post by livesoft »

Are you selling the first shares in? That is, the ones purchased first? Or are you selling shares purchased after the first shares were purchased?
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jefmafnl
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Re: Selling "non-covered" Vanguard mutual fund shares

Post by jefmafnl »

Not the first in.
rkhusky
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Re: Selling "non-covered" Vanguard mutual fund shares

Post by rkhusky »

You are supposed to, and get a confirmation, but I am not sure what is the best method for doing that - secure message, phone call, or chat. Perhaps you can let us know what works?
RickyAZ
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Re: Selling "non-covered" Vanguard mutual fund shares

Post by RickyAZ »

Non covered shares are always average cost. Since VGI isn’t reporting to the IRS you can report whatever basis you want.

Cheers
Empiricus
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Re: Selling "non-covered" Vanguard mutual fund shares

Post by Empiricus »

jefmafnl wrote: Tue Apr 02, 2024 7:44 am Not the first in.
Read Pub 550, p. 65: https://www.irs.gov/pub/irs-pdf/p550.pdf

"Adequately identify" has more than one meaning and the IRS gives one meaning.

FIFO is the default.
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Re: Selling "non-covered" Vanguard mutual fund shares

Post by livesoft »

RickyAZ wrote: Tue Apr 02, 2024 8:05 am Non covered shares are always average cost. Since VGI isn’t reporting to the IRS you can report whatever basis you want.

Cheers
This is a misstatement. More accurate would be that Vanguard would report to you and not to the IRS the average cost of your non-covered shares. You are free to ignore what Vanguard reports to you if you can document a different cost basis.
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livesoft
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Re: Selling "non-covered" Vanguard mutual fund shares

Post by livesoft »

jefmafnl wrote: Tue Apr 02, 2024 7:44 am Not the first in.
Then you would have to tell Vanguard the "Date(s) acquired" of the shares you wanted to sell. This is usually done in a "Letter of Instruction" which can be simple to create.
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jefmafnl
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Re: Selling "non-covered" Vanguard mutual fund shares

Post by jefmafnl »

Thanks to all who replied.

Just to double-check: if I have never sold non-covered shares of a particular Vanguard fund before, am I allowed to use average cost basis when selling non-covered shares, even if I have used, and continue to use, specific ID for covered shares?

J
toddthebod
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Re: Selling "non-covered" Vanguard mutual fund shares

Post by toddthebod »

jefmafnl wrote: Tue Apr 02, 2024 9:51 am Thanks to all who replied.

Just to double-check: if I have never sold non-covered shares of a particular Vanguard fund before, am I allowed to use average cost basis when selling non-covered shares, even if I have used, and continue to use, specific ID for covered shares?

J
Yes. They account for them separately.
Empiricus
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Re: Selling "non-covered" Vanguard mutual fund shares

Post by Empiricus »

jefmafnl wrote: Tue Apr 02, 2024 9:51 am Just to double-check: if I have never sold non-covered shares of a particular Vanguard fund before, am I allowed to use average cost basis when selling non-covered shares, even if I have used, and continue to use, specific ID for covered shares?
Are you certain that you want to use average cost basis for ALL of the non-covered shares in that fund?
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jefmafnl
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Re: Selling "non-covered" Vanguard mutual fund shares

Post by jefmafnl »

We (US citizens) no longer live in the US. Under the relevant treaty, we are required to report our cap. gains on our US return. However, this income is allocated to our country of residence, thus NOT taxable in the US. And our country of residence taxes assets, not cap. gains.
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Re: Selling "non-covered" Vanguard mutual fund shares

Post by Makefile »

livesoft wrote: Tue Apr 02, 2024 8:25 am
jefmafnl wrote: Tue Apr 02, 2024 7:44 am Not the first in.
Then you would have to tell Vanguard the "Date(s) acquired" of the shares you wanted to sell. This is usually done in a "Letter of Instruction" which can be simple to create.
Is it correct that the letter--and Vanguard acknowledging it--is just a "get out of jail free card" if your noncovered sales get audited by the IRS? i.e. it's only to emulate the process of flipping through your drawer of stock certificates to sell a specific one, and Vanguard doesn't actually do anything with the information.
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Re: Selling "non-covered" Vanguard mutual fund shares

Post by Empiricus »

Makefile wrote: Tue Apr 02, 2024 12:10 pm
livesoft wrote: Tue Apr 02, 2024 8:25 am
jefmafnl wrote: Tue Apr 02, 2024 7:44 am Not the first in.
Then you would have to tell Vanguard the "Date(s) acquired" of the shares you wanted to sell. This is usually done in a "Letter of Instruction" which can be simple to create.
i.e. it's only to emulate the process of flipping through your drawer of stock certificates to sell a specific one, and Vanguard doesn't actually do anything with the information.
Vanguard is not a party; it's between the taxpayer and the IRS. Read Publication 550, p. 65-66. The IRS explains what they mean by "adequately identify."

https://www.irs.gov/pub/irs-pdf/p550.pdf

"You will adequately identify your mutual fund shares, even if you bought the shares in different lots at various prices and times, if you:

1. Specify to your broker or other agent the particular shares to be sold or transferred at the time of the sale or transfer, and

2. Receive confirmation in writing from your broker or other agent within a reasonable time of your specification of the particular shares sold or transferred.

You continue to have the burden of proving your basis in the specified shares at the time of sale or transfer."
Nver2Late
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Re: Selling "non-covered" Vanguard mutual fund shares

Post by Nver2Late »

Empiricus wrote: Tue Apr 02, 2024 1:32 pm
Vanguard is not a party; it's between the taxpayer and the IRS. Read Publication 550, p. 65-66. The IRS explains what they mean by "adequately identify."

https://www.irs.gov/pub/irs-pdf/p550.pdf

"You will adequately identify your mutual fund shares, even if you bought the shares in different lots at various prices and times, if you:

1. Specify to your broker or other agent the particular shares to be sold or transferred at the time of the sale or transfer, and

2. Receive confirmation in writing from your broker or other agent within a reasonable time of your specification of the particular shares sold or transferred.

You continue to have the burden of proving your basis in the specified shares at the time of sale or transfer."
The timing requirement is interesting.

Vanguard sold non-covered shares on my specID MF account to cover the $25 fee without asking which lot I wanted them to use. I did not approve or provide a specific lot, they did not ask. Before the fee was charged, I had a back and forth requesting for Vanguard to ask me for the lot and they replied that they use average cost, FIFO regardless for the fee. I would have prefered them to use a covered share, but they said no go.

I did just select the specific lot and reported the associated non-covered shares on my taxes. I will send Vanguard an email identifying the specific non-covered lot I chose, but the timing is the question. With Vanguards process for the MF fee, it will always be after the fact.
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livesoft
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Re: Selling "non-covered" Vanguard mutual fund shares

Post by livesoft »

Makefile wrote: Tue Apr 02, 2024 12:10 pm
livesoft wrote: Tue Apr 02, 2024 8:25 am
jefmafnl wrote: Tue Apr 02, 2024 7:44 am Not the first in.
Then you would have to tell Vanguard the "Date(s) acquired" of the shares you wanted to sell. This is usually done in a "Letter of Instruction" which can be simple to create.
Is it correct that the letter--and Vanguard acknowledging it--is just a "get out of jail free card" if your noncovered sales get audited by the IRS? i.e. it's only to emulate the process of flipping through your drawer of stock certificates to sell a specific one, and Vanguard doesn't actually do anything with the information.
That's the way I think about it. I wouldn't care if Vanguard acknowledged such a letter or not, but in "Ye Olde Days" a trade confirmation of the executed sell order supplied by one's broker would probably have the term "Versus Purchase Date" on it which is a pretty explicit acknowledgement.

Does anybody look at trade confirmation documents anymore?
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FactualFran
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Re: Selling "non-covered" Vanguard mutual fund shares

Post by FactualFran »

Nver2Late wrote: Tue Apr 02, 2024 2:00 pm Vanguard sold non-covered shares on my specID MF account to cover the $25 fee without asking which lot I wanted them to use. I did not approve or provide a specific lot, they did not ask. Before the fee was charged, I had a back and forth requesting for Vanguard to ask me for the lot and they replied that they use average cost, FIFO regardless for the fee. I would have prefered them to use a covered share, but they said no go.

I did just select the specific lot and reported the associated non-covered shares on my taxes. I will send Vanguard an email identifying the specific non-covered lot I chose, but the timing is the question. With Vanguards process for the MF fee, it will always be after the fact.
In this case, you are not allowed to use specific share identification because you did not follow the directions in IRS Publication 550 to adequately identify which shares were sold. When reporting a sale on an income tax return for non-covered shares of a mutual fund that have not been adequately identified, you are allowed to use the default basis of a cost basis of FIFO or an average basis. It is very unlikely that that the IRS will detect that you did not adequately identify which shares were sold.
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Re: Selling "non-covered" Vanguard mutual fund shares

Post by Toons »

Average Cost Basis
No need to contact Vanguard :happy
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Re: Selling "non-covered" Vanguard mutual fund shares

Post by marcopolo »

livesoft wrote: Tue Apr 02, 2024 8:25 am
jefmafnl wrote: Tue Apr 02, 2024 7:44 am Not the first in.
Then you would have to tell Vanguard the "Date(s) acquired" of the shares you wanted to sell. This is usually done in a "Letter of Instruction" which can be simple to create.
Seriously? Vanguard requires you to write them a letter?!?
Do you have to Fax it to them, or send it by carrier pigeon?

I am glad all my taxable accounts have been at Fidelity for sometime. I guess they are not required to keep track of lots prior to 2012, but for all my investments, i can clearly see every lot purchased, including non-covered share, with cost basis for each lot. When i go to sell and select "specify shares", i get a list of each lot, and can select which ones i want to sell. No need to write a letter.
Once in a while you get shown the light, in the strangest of places if you look at it right.
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Re: Selling "non-covered" Vanguard mutual fund shares

Post by Nver2Late »

FactualFran wrote: Tue Apr 02, 2024 3:15 pm
Nver2Late wrote: Tue Apr 02, 2024 2:00 pm Vanguard sold non-covered shares on my specID MF account to cover the $25 fee without asking which lot I wanted them to use. I did not approve or provide a specific lot, they did not ask. Before the fee was charged, I had a back and forth requesting for Vanguard to ask me for the lot and they replied that they use average cost, FIFO regardless for the fee. I would have prefered them to use a covered share, but they said no go.

I did just select the specific lot and reported the associated non-covered shares on my taxes. I will send Vanguard an email identifying the specific non-covered lot I chose, but the timing is the question. With Vanguards process for the MF fee, it will always be after the fact.
In this case, you are not allowed to use specific share identification because you did not follow the directions in IRS Publication 550 to adequately identify which shares were sold. When reporting a sale on an income tax return for non-covered shares of a mutual fund that have not been adequately identified, you are allowed to use the default basis of a cost basis of FIFO or an average basis. It is very unlikely that that the IRS will detect that you did not adequately identify which shares were sold.
That's the dilemma. In previous years, I had already disposed of a significant portion of the non-covered shares by specID, notified Vanguard properly, and previous reported properly on my taxes. A portion were gifted shares in which the specID basis was sent along to the giftee to report on their taxes when sold. So Vanguard's average cost basis is incorrect. Vanguard's remaining share count is correct.

That is why I tried to proactively identify shares for Vanguard to sell, but I suspect the CSR responding did not understand the nuance of this issue and why Vanguard selling average cost no longer worked on an account that previously disposed of non-covered shares by SpecID.

I have a firm handle on our remaining lots and basis. Just concerned about the Vanguard process not conforming.
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Re: Selling "non-covered" Vanguard mutual fund shares

Post by Empiricus »

marcopolo wrote: Tue Apr 02, 2024 3:53 pm
livesoft wrote: Tue Apr 02, 2024 8:25 am
jefmafnl wrote: Tue Apr 02, 2024 7:44 am Not the first in.
Then you would have to tell Vanguard the "Date(s) acquired" of the shares you wanted to sell. This is usually done in a "Letter of Instruction" which can be simple to create.
Seriously? Vanguard requires you to write them a letter?!?
Do you have to Fax it to them, or send it by carrier pigeon?
Please see my posts above...IRS Publication 550 p. 65-66. It has nothing to do with the broker, it's an IRS statement.
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Re: Selling "non-covered" Vanguard mutual fund shares

Post by marcopolo »

Empiricus wrote: Tue Apr 02, 2024 3:57 pm
marcopolo wrote: Tue Apr 02, 2024 3:53 pm
livesoft wrote: Tue Apr 02, 2024 8:25 am
jefmafnl wrote: Tue Apr 02, 2024 7:44 am Not the first in.
Then you would have to tell Vanguard the "Date(s) acquired" of the shares you wanted to sell. This is usually done in a "Letter of Instruction" which can be simple to create.
Seriously? Vanguard requires you to write them a letter?!?
Do you have to Fax it to them, or send it by carrier pigeon?
Please see my posts above...IRS Publication 550 p. 65-66. It has nothing to do with the broker, it's an IRS statement.
Sure. But, i don't see where the IRS requires you to send them a letter.
That is a broker decision.

Fidelity allowing you to select lots online when you sell is another way to accomplish the same thing, in a much more customer friendly way.
Once in a while you get shown the light, in the strangest of places if you look at it right.
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Re: Selling "non-covered" Vanguard mutual fund shares

Post by tetractys »

marcopolo wrote: Tue Apr 02, 2024 3:53 pmI guess they are not required to keep track of lots prior to 2012, but for all my investments, i can clearly see every lot purchased, including non-covered share, with cost basis for each lot.
If you can see them they are covered. If they are non-covered, by definition you could not see them.

It’s always been the case (or at least in my 30 year memory) that specific ID lots are reported to the IRS, one way or another. It used to be all by letter of instruction and tax reporting.
Last edited by tetractys on Tue Apr 02, 2024 4:15 pm, edited 1 time in total.
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Re: Selling "non-covered" Vanguard mutual fund shares

Post by marcopolo »

tetractys wrote: Tue Apr 02, 2024 4:10 pm
marcopolo wrote: Tue Apr 02, 2024 3:53 pmI guess they are not required to keep track of lots prior to 2012, but for all my investments, i can clearly see every lot purchased, including non-covered share, with cost basis for each lot.
If you can see them they are covered. If they are non-covered, by definition you could not see them.
I don't think that is true.

non-covered just means that the broker is not required to track them and report them to the IRS.
That does not mean that they can not do so to provide a useful service to their customers.
Once in a while you get shown the light, in the strangest of places if you look at it right.
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Re: Selling "non-covered" Vanguard mutual fund shares

Post by Empiricus »

marcopolo wrote: Tue Apr 02, 2024 4:04 pm
Empiricus wrote: Tue Apr 02, 2024 3:57 pm
marcopolo wrote: Tue Apr 02, 2024 3:53 pm
livesoft wrote: Tue Apr 02, 2024 8:25 am
jefmafnl wrote: Tue Apr 02, 2024 7:44 am Not the first in.
Then you would have to tell Vanguard the "Date(s) acquired" of the shares you wanted to sell. This is usually done in a "Letter of Instruction" which can be simple to create.
Seriously? Vanguard requires you to write them a letter?!?
Do you have to Fax it to them, or send it by carrier pigeon?
Please see my posts above...IRS Publication 550 p. 65-66. It has nothing to do with the broker, it's an IRS statement.
Sure. But, i don't see where the IRS requires you to send them a letter.
That is a broker decision.
Pub 550 does not require that a letter be sent to the IRS.

The broker is not a party; it's between the taxpayer and the IRS. Read Publication 550, p. 65-66. The IRS explains what they mean by "adequately identify."

https://www.irs.gov/pub/irs-pdf/p550.pdf

"You will adequately identify your mutual fund shares, even if you bought the shares in different lots at various prices and times, if you:

1. Specify to your broker or other agent the particular shares to be sold or transferred at the time of the sale or transfer, and

2. Receive confirmation in writing from your broker or other agent within a reasonable time of your specification of the particular shares sold or transferred.

You continue to have the burden of proving your basis in the specified shares at the time of sale or transfer."

It sounds like Fidelity may have a better interface than Vanguard.
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Re: Selling "non-covered" Vanguard mutual fund shares

Post by marcopolo »

Empiricus wrote: Tue Apr 02, 2024 4:23 pm
marcopolo wrote: Tue Apr 02, 2024 4:04 pm
Empiricus wrote: Tue Apr 02, 2024 3:57 pm
marcopolo wrote: Tue Apr 02, 2024 3:53 pm
livesoft wrote: Tue Apr 02, 2024 8:25 am
Then you would have to tell Vanguard the "Date(s) acquired" of the shares you wanted to sell. This is usually done in a "Letter of Instruction" which can be simple to create.
Seriously? Vanguard requires you to write them a letter?!?
Do you have to Fax it to them, or send it by carrier pigeon?
Please see my posts above...IRS Publication 550 p. 65-66. It has nothing to do with the broker, it's an IRS statement.
Sure. But, i don't see where the IRS requires you to send them a letter.
That is a broker decision.
Pub 550 does not require that a letter be sent to the IRS.

The broker is not a party; it's between the taxpayer and the IRS. Read Publication 550, p. 65-66. The IRS explains what they mean by "adequately identify."

https://www.irs.gov/pub/irs-pdf/p550.pdf

"You will adequately identify your mutual fund shares, even if you bought the shares in different lots at various prices and times, if you:

1. Specify to your broker or other agent the particular shares to be sold or transferred at the time of the sale or transfer, and

2. Receive confirmation in writing from your broker or other agent within a reasonable time of your specification of the particular shares sold or transferred.

You continue to have the burden of proving your basis in the specified shares at the time of sale or transfer."

It sounds like Fidelity may have a better interface than Vanguard.
I don't know what you were hoping to accomplish by repeating your original post.

My comment was about the interface. That is the whole point.
Vanguard apparently requires a letter (to Vanguard, not IRS) to accomplish step (1).
Whereas, Fidelity allows you to do it simply online when you place the order.
Once in a while you get shown the light, in the strangest of places if you look at it right.
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Re: Selling "non-covered" Vanguard mutual fund shares

Post by rkhusky »

marcopolo wrote: Tue Apr 02, 2024 4:32 pm
Empiricus wrote: Tue Apr 02, 2024 4:23 pm
marcopolo wrote: Tue Apr 02, 2024 4:04 pm
Empiricus wrote: Tue Apr 02, 2024 3:57 pm
marcopolo wrote: Tue Apr 02, 2024 3:53 pm

Seriously? Vanguard requires you to write them a letter?!?
Do you have to Fax it to them, or send it by carrier pigeon?
Please see my posts above...IRS Publication 550 p. 65-66. It has nothing to do with the broker, it's an IRS statement.
Sure. But, i don't see where the IRS requires you to send them a letter.
That is a broker decision.
Pub 550 does not require that a letter be sent to the IRS.

The broker is not a party; it's between the taxpayer and the IRS. Read Publication 550, p. 65-66. The IRS explains what they mean by "adequately identify."

https://www.irs.gov/pub/irs-pdf/p550.pdf

"You will adequately identify your mutual fund shares, even if you bought the shares in different lots at various prices and times, if you:

1. Specify to your broker or other agent the particular shares to be sold or transferred at the time of the sale or transfer, and

2. Receive confirmation in writing from your broker or other agent within a reasonable time of your specification of the particular shares sold or transferred.

You continue to have the burden of proving your basis in the specified shares at the time of sale or transfer."

It sounds like Fidelity may have a better interface than Vanguard.
I don't know what you were hoping to accomplish by repeating your original post.

My comment was about the interface. That is the whole point.
Vanguard apparently requires a letter (to Vanguard, not IRS) to accomplish step (1).
Whereas, Fidelity allows you to do it simply online when you place the order.
Vanguard doesn’t require a letter. Others have reported letting Vanguard know via secure messaging.
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Re: Selling "non-covered" Vanguard mutual fund shares

Post by Empiricus »

marcopolo wrote: Tue Apr 02, 2024 4:32 pm
Empiricus wrote: Tue Apr 02, 2024 4:23 pm
marcopolo wrote: Tue Apr 02, 2024 4:04 pm
Empiricus wrote: Tue Apr 02, 2024 3:57 pm
marcopolo wrote: Tue Apr 02, 2024 3:53 pm

Seriously? Vanguard requires you to write them a letter?!?
Do you have to Fax it to them, or send it by carrier pigeon?
Please see my posts above...IRS Publication 550 p. 65-66. It has nothing to do with the broker, it's an IRS statement.
Sure. But, i don't see where the IRS requires you to send them a letter.
That is a broker decision.
Pub 550 does not require that a letter be sent to the IRS.

The broker is not a party; it's between the taxpayer and the IRS. Read Publication 550, p. 65-66. The IRS explains what they mean by "adequately identify."

https://www.irs.gov/pub/irs-pdf/p550.pdf

"You will adequately identify your mutual fund shares, even if you bought the shares in different lots at various prices and times, if you:

1. Specify to your broker or other agent the particular shares to be sold or transferred at the time of the sale or transfer, and

2. Receive confirmation in writing from your broker or other agent within a reasonable time of your specification of the particular shares sold or transferred.

You continue to have the burden of proving your basis in the specified shares at the time of sale or transfer."

It sounds like Fidelity may have a better interface than Vanguard.
I don't know what you were hoping to accomplish by repeating your original post.

My comment was about the interface. That is the whole point.
Vanguard apparently requires a letter (to Vanguard, not IRS) to accomplish step (1).
Whereas, Fidelity allows you to do it simply online when you place the order.
I'm trying to help you by reiterating. No faxes, no carrier pigeons. Vanguard doesn't require anything.
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Re: Selling "non-covered" Vanguard mutual fund shares

Post by FactualFran »

Nver2Late wrote: Tue Apr 02, 2024 3:55 pm That's the dilemma. In previous years, I had already disposed of a significant portion of the non-covered shares by specID, notified Vanguard properly, and previous reported properly on my taxes. A portion were gifted shares in which the specID basis was sent along to the giftee to report on their taxes when sold. So Vanguard's average cost basis is incorrect. Vanguard's remaining share count is correct.

That is why I tried to proactively identify shares for Vanguard to sell, but I suspect the CSR responding did not understand the nuance of this issue and why Vanguard selling average cost no longer worked on an account that previously disposed of non-covered shares by SpecID.

I have a firm handle on our remaining lots and basis. Just concerned about the Vanguard process not conforming.
It is unfortunate that $25 worth of shares shares sold to cover a fee were not adequately identified by the date of the sale. Because the previous sales of shares of the mutual fund used a cost basis, rather than average basis, the row of Form 8949 for the sale to cover a fee should have as the basis the cost of shares sold in first-in first-out order. Future sales of the non-covered shares of the same mutual fund will be allowed to use specific share identification by following the directions in IRS Publication 550 to adequately identify which shares are being sold.
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Re: Selling "non-covered" Vanguard mutual fund shares

Post by Nver2Late »

FactualFran wrote: Tue Apr 02, 2024 5:15 pm
Nver2Late wrote: Tue Apr 02, 2024 3:55 pm That's the dilemma. In previous years, I had already disposed of a significant portion of the non-covered shares by specID, notified Vanguard properly, and previous reported properly on my taxes. A portion were gifted shares in which the specID basis was sent along to the giftee to report on their taxes when sold. So Vanguard's average cost basis is incorrect. Vanguard's remaining share count is correct.

That is why I tried to proactively identify shares for Vanguard to sell, but I suspect the CSR responding did not understand the nuance of this issue and why Vanguard selling average cost no longer worked on an account that previously disposed of non-covered shares by SpecID.

I have a firm handle on our remaining lots and basis. Just concerned about the Vanguard process not conforming.
It is unfortunate that $25 worth of shares shares sold to cover a fee were not adequately identified by the date of the sale. Because the previous sales of shares of the mutual fund used a cost basis, rather than average basis, the row of Form 8949 for the sale to cover a fee should have as the basis the cost of shares sold in first-in first-out order. Future sales of the non-covered shares of the same mutual fund will be allowed to use specific share identification by following the directions in IRS Publication 550 to adequately identify which shares are being sold.
Thanks for the clarifications. Your comments are very helpful.

Edit: In hindsight, I probably should have stuck with average cost for these shares. They were acquired from the 90s with a monthly autobuys that spanned through the dotcom and 2008 pullbacks, so I was focused on the VTSAX share price range of $16.43 to $37.80. Seemed like a significant difference. But I should have focused on the difference between today's price, 125.20 and average price of 26ish and realized that I wasn't really seeing that much benefit by SpecID on these noncovered shares with that range.
"Better is the enemy of good." Good is good.
marcopolo
Posts: 8556
Joined: Sat Dec 03, 2016 9:22 am

Re: Selling "non-covered" Vanguard mutual fund shares

Post by marcopolo »

rkhusky wrote: Tue Apr 02, 2024 4:37 pm
marcopolo wrote: Tue Apr 02, 2024 4:32 pm
Empiricus wrote: Tue Apr 02, 2024 4:23 pm
marcopolo wrote: Tue Apr 02, 2024 4:04 pm
Empiricus wrote: Tue Apr 02, 2024 3:57 pm

Please see my posts above...IRS Publication 550 p. 65-66. It has nothing to do with the broker, it's an IRS statement.
Sure. But, i don't see where the IRS requires you to send them a letter.
That is a broker decision.
Pub 550 does not require that a letter be sent to the IRS.

The broker is not a party; it's between the taxpayer and the IRS. Read Publication 550, p. 65-66. The IRS explains what they mean by "adequately identify."

https://www.irs.gov/pub/irs-pdf/p550.pdf

"You will adequately identify your mutual fund shares, even if you bought the shares in different lots at various prices and times, if you:

1. Specify to your broker or other agent the particular shares to be sold or transferred at the time of the sale or transfer, and

2. Receive confirmation in writing from your broker or other agent within a reasonable time of your specification of the particular shares sold or transferred.

You continue to have the burden of proving your basis in the specified shares at the time of sale or transfer."

It sounds like Fidelity may have a better interface than Vanguard.
I don't know what you were hoping to accomplish by repeating your original post.

My comment was about the interface. That is the whole point.
Vanguard apparently requires a letter (to Vanguard, not IRS) to accomplish step (1).
Whereas, Fidelity allows you to do it simply online when you place the order.
Vanguard doesn’t require a letter. Others have reported letting Vanguard know via secure messaging.
Still seems pretty clumsy, as compared to simply selecting the lots during the selling process.

Also, wasn't there a long thread about Vanguard getting rid of secure messaging.
Once in a while you get shown the light, in the strangest of places if you look at it right.
marcopolo
Posts: 8556
Joined: Sat Dec 03, 2016 9:22 am

Re: Selling "non-covered" Vanguard mutual fund shares

Post by marcopolo »

Empiricus wrote: Tue Apr 02, 2024 5:12 pm
marcopolo wrote: Tue Apr 02, 2024 4:32 pm
Empiricus wrote: Tue Apr 02, 2024 4:23 pm
marcopolo wrote: Tue Apr 02, 2024 4:04 pm
Empiricus wrote: Tue Apr 02, 2024 3:57 pm

Please see my posts above...IRS Publication 550 p. 65-66. It has nothing to do with the broker, it's an IRS statement.
Sure. But, i don't see where the IRS requires you to send them a letter.
That is a broker decision.
Pub 550 does not require that a letter be sent to the IRS.

The broker is not a party; it's between the taxpayer and the IRS. Read Publication 550, p. 65-66. The IRS explains what they mean by "adequately identify."

https://www.irs.gov/pub/irs-pdf/p550.pdf

"You will adequately identify your mutual fund shares, even if you bought the shares in different lots at various prices and times, if you:

1. Specify to your broker or other agent the particular shares to be sold or transferred at the time of the sale or transfer, and

2. Receive confirmation in writing from your broker or other agent within a reasonable time of your specification of the particular shares sold or transferred.

You continue to have the burden of proving your basis in the specified shares at the time of sale or transfer."

It sounds like Fidelity may have a better interface than Vanguard.
I don't know what you were hoping to accomplish by repeating your original post.

My comment was about the interface. That is the whole point.
Vanguard apparently requires a letter (to Vanguard, not IRS) to accomplish step (1).
Whereas, Fidelity allows you to do it simply online when you place the order.
I'm trying to help you by reiterating. No faxes, no carrier pigeons. Vanguard doesn't require anything.
How else does one accomplish item (1) you posted?
Several people above posted that it is done by a letter.
Once in a while you get shown the light, in the strangest of places if you look at it right.
Empiricus
Posts: 29
Joined: Fri Feb 17, 2023 10:00 am

Re: Selling "non-covered" Vanguard mutual fund shares

Post by Empiricus »

marcopolo wrote: Tue Apr 02, 2024 6:27 pm
Empiricus wrote: Tue Apr 02, 2024 5:12 pm
marcopolo wrote: Tue Apr 02, 2024 4:32 pm
Empiricus wrote: Tue Apr 02, 2024 4:23 pm
marcopolo wrote: Tue Apr 02, 2024 4:04 pm

Sure. But, i don't see where the IRS requires you to send them a letter.
That is a broker decision.
Pub 550 does not require that a letter be sent to the IRS.

The broker is not a party; it's between the taxpayer and the IRS. Read Publication 550, p. 65-66. The IRS explains what they mean by "adequately identify."

https://www.irs.gov/pub/irs-pdf/p550.pdf

"You will adequately identify your mutual fund shares, even if you bought the shares in different lots at various prices and times, if you:

1. Specify to your broker or other agent the particular shares to be sold or transferred at the time of the sale or transfer, and

2. Receive confirmation in writing from your broker or other agent within a reasonable time of your specification of the particular shares sold or transferred.

You continue to have the burden of proving your basis in the specified shares at the time of sale or transfer."

It sounds like Fidelity may have a better interface than Vanguard.
I don't know what you were hoping to accomplish by repeating your original post.

My comment was about the interface. That is the whole point.
Vanguard apparently requires a letter (to Vanguard, not IRS) to accomplish step (1).
Whereas, Fidelity allows you to do it simply online when you place the order.
I'm trying to help you by reiterating. No faxes, no carrier pigeons. Vanguard doesn't require anything.
How else does one accomplish item (1) you posted?
Several people above posted that it is done by a letter.
Great, sounds like you understand now. Pub 550, p. 65-66, simple notification and confirmation, not a Vanguard requirement.
marcopolo
Posts: 8556
Joined: Sat Dec 03, 2016 9:22 am

Re: Selling "non-covered" Vanguard mutual fund shares

Post by marcopolo »

Empiricus wrote: Tue Apr 02, 2024 6:40 pm
marcopolo wrote: Tue Apr 02, 2024 6:27 pm
Empiricus wrote: Tue Apr 02, 2024 5:12 pm
marcopolo wrote: Tue Apr 02, 2024 4:32 pm
Empiricus wrote: Tue Apr 02, 2024 4:23 pm

Pub 550 does not require that a letter be sent to the IRS.

The broker is not a party; it's between the taxpayer and the IRS. Read Publication 550, p. 65-66. The IRS explains what they mean by "adequately identify."

https://www.irs.gov/pub/irs-pdf/p550.pdf

"You will adequately identify your mutual fund shares, even if you bought the shares in different lots at various prices and times, if you:

1. Specify to your broker or other agent the particular shares to be sold or transferred at the time of the sale or transfer, and

2. Receive confirmation in writing from your broker or other agent within a reasonable time of your specification of the particular shares sold or transferred.

You continue to have the burden of proving your basis in the specified shares at the time of sale or transfer."

It sounds like Fidelity may have a better interface than Vanguard.
I don't know what you were hoping to accomplish by repeating your original post.

My comment was about the interface. That is the whole point.
Vanguard apparently requires a letter (to Vanguard, not IRS) to accomplish step (1).
Whereas, Fidelity allows you to do it simply online when you place the order.
I'm trying to help you by reiterating. No faxes, no carrier pigeons. Vanguard doesn't require anything.
How else does one accomplish item (1) you posted?
Several people above posted that it is done by a letter.
Great, sounds like you understand now. Pub 550, p. 65-66, simple notification and confirmation, not a Vanguard requirement.
I understood the entire time.
I think you missed the whole point of this thread.

The discussion was about the mechanics of how to notify the brokerage about which shares are to be sold.
Once in a while you get shown the light, in the strangest of places if you look at it right.
rkhusky
Posts: 17992
Joined: Thu Aug 18, 2011 8:09 pm

Re: Selling "non-covered" Vanguard mutual fund shares

Post by rkhusky »

marcopolo wrote: Tue Apr 02, 2024 6:24 pm
rkhusky wrote: Tue Apr 02, 2024 4:37 pm
marcopolo wrote: Tue Apr 02, 2024 4:32 pm
Empiricus wrote: Tue Apr 02, 2024 4:23 pm
marcopolo wrote: Tue Apr 02, 2024 4:04 pm

Sure. But, i don't see where the IRS requires you to send them a letter.
That is a broker decision.
Pub 550 does not require that a letter be sent to the IRS.

The broker is not a party; it's between the taxpayer and the IRS. Read Publication 550, p. 65-66. The IRS explains what they mean by "adequately identify."

https://www.irs.gov/pub/irs-pdf/p550.pdf

"You will adequately identify your mutual fund shares, even if you bought the shares in different lots at various prices and times, if you:

1. Specify to your broker or other agent the particular shares to be sold or transferred at the time of the sale or transfer, and

2. Receive confirmation in writing from your broker or other agent within a reasonable time of your specification of the particular shares sold or transferred.

You continue to have the burden of proving your basis in the specified shares at the time of sale or transfer."

It sounds like Fidelity may have a better interface than Vanguard.
I don't know what you were hoping to accomplish by repeating your original post.

My comment was about the interface. That is the whole point.
Vanguard apparently requires a letter (to Vanguard, not IRS) to accomplish step (1).
Whereas, Fidelity allows you to do it simply online when you place the order.
Vanguard doesn’t require a letter. Others have reported letting Vanguard know via secure messaging.
Still seems pretty clumsy, as compared to simply selecting the lots during the selling process.

Also, wasn't there a long thread about Vanguard getting rid of secure messaging.
Yes, Vanguard doesn’t let you choose lots of uncovered shares online. All uncovered shares are placed into a single group.
marcopolo
Posts: 8556
Joined: Sat Dec 03, 2016 9:22 am

Re: Selling "non-covered" Vanguard mutual fund shares

Post by marcopolo »

rkhusky wrote: Tue Apr 02, 2024 7:59 pm
marcopolo wrote: Tue Apr 02, 2024 6:24 pm
rkhusky wrote: Tue Apr 02, 2024 4:37 pm
marcopolo wrote: Tue Apr 02, 2024 4:32 pm
Empiricus wrote: Tue Apr 02, 2024 4:23 pm

Pub 550 does not require that a letter be sent to the IRS.

The broker is not a party; it's between the taxpayer and the IRS. Read Publication 550, p. 65-66. The IRS explains what they mean by "adequately identify."

https://www.irs.gov/pub/irs-pdf/p550.pdf

"You will adequately identify your mutual fund shares, even if you bought the shares in different lots at various prices and times, if you:

1. Specify to your broker or other agent the particular shares to be sold or transferred at the time of the sale or transfer, and

2. Receive confirmation in writing from your broker or other agent within a reasonable time of your specification of the particular shares sold or transferred.

You continue to have the burden of proving your basis in the specified shares at the time of sale or transfer."

It sounds like Fidelity may have a better interface than Vanguard.
I don't know what you were hoping to accomplish by repeating your original post.

My comment was about the interface. That is the whole point.
Vanguard apparently requires a letter (to Vanguard, not IRS) to accomplish step (1).
Whereas, Fidelity allows you to do it simply online when you place the order.
Vanguard doesn’t require a letter. Others have reported letting Vanguard know via secure messaging.
Still seems pretty clumsy, as compared to simply selecting the lots during the selling process.

Also, wasn't there a long thread about Vanguard getting rid of secure messaging.
Yes, Vanguard doesn’t let you choose lots of uncovered shares online. All uncovered shares are placed into a single group.
Interesting.
So, if you hold both covered and uncovered shares in the same account and sell some of the uncovered shares using average cost because you neglected to give them written instructions, are you then stuck using average cost for all your covered shares as well?
Once in a while you get shown the light, in the strangest of places if you look at it right.
rkhusky
Posts: 17992
Joined: Thu Aug 18, 2011 8:09 pm

Re: Selling "non-covered" Vanguard mutual fund shares

Post by rkhusky »

marcopolo wrote: Tue Apr 02, 2024 8:07 pm
rkhusky wrote: Tue Apr 02, 2024 7:59 pm
marcopolo wrote: Tue Apr 02, 2024 6:24 pm
rkhusky wrote: Tue Apr 02, 2024 4:37 pm
marcopolo wrote: Tue Apr 02, 2024 4:32 pm

I don't know what you were hoping to accomplish by repeating your original post.

My comment was about the interface. That is the whole point.
Vanguard apparently requires a letter (to Vanguard, not IRS) to accomplish step (1).
Whereas, Fidelity allows you to do it simply online when you place the order.
Vanguard doesn’t require a letter. Others have reported letting Vanguard know via secure messaging.
Still seems pretty clumsy, as compared to simply selecting the lots during the selling process.

Also, wasn't there a long thread about Vanguard getting rid of secure messaging.
Yes, Vanguard doesn’t let you choose lots of uncovered shares online. All uncovered shares are placed into a single group.
Interesting.
So, if you hold both covered and uncovered shares in the same account and sell some of the uncovered shares using average cost because you neglected to give them written instructions, are you then stuck using average cost for all your covered shares as well?
No, they are handled separately. Factual Fran has provided the IRS documentation showing this option, which most brokerages take.
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