Is this stock matching allowed?

Question

Hello,I have heard that stocks are sold in a first in first out(FIFO) order. I also heard that you can specify the order tooverride the FIFO order. I have this contrived case: 2003-09-15 bought 200 shares of XYZ, cost 3080.052004-08-20 bought 200 shares of XYZ, cost 3480.052004-08-31 sold 200 shares of XYZ, proceeds 3520.052004-12-27 sold 200 shares of XYZ, proceeds 3680.05If I use FIFO, then both sales are less than one year andthe two gains are considered short-term. However, if Ispecify that the first 200 shares sold were bought on20040820, then the second sale is matched with 20030915 andthat gain can now be considered as long-term since it isheld for more than a year. I am wondering whether thisnon-FIFO match is allowed by the tax law. Your answer isappreciated. Caihong

Harlan Lunsford · Accepted Answer

Yes, it's allowed, as LONG as you do the matching at thetime of sale and not posthumously. ChEAr$,Harlan Lunsford, EA n LA

Barry Margolin · Answer

You mean I can't specify the shares in my will?--Barry Margolin,        Arlington, MA

A.G. Kalman · Answer

That would be a neat trick!--Alan

Harlan Lunsford · Answer

Note: the OP asked about a sale, and not about shares inherited. That said, but of course you may specify which shares to whom in your will. Or does that matter? Do they get stepped up basis anyway? If so, DO specify and let the legatees and their tax pros wonder just what the heck was meant by that. ChEAr$, Harlan Lunsford, EA n LA Tue 8 Mar 2005

Barry Margolin · Answer

I know.  I was making a joke on the previous poster's misuseof the word "posthumously", when he meant "post facto". --Barry Margolin,        Arlington, MA

Harlan Lunsford · Answer

Replace that "dead" word "posthumously"  and substitute.ex post facto .   Is that right?ChEAr$,posting this humourously,Harlan Lunsford, EA n LAWed 9 Mar 2005

Rick Merrill · Answer

While humor is 'allowed' in the newsgroup, it is a VerySerious news group and we are not easily amused!-) Moderator:  I was amuse because it surprised me that Harlan's  vocabulary was so extensive.

Harlan Lunsford · Answer

Had I not been so amused at your seeing the error of your ways, I might have been insulted, Dick. And if you believe that, Rick, I've got some Net2phone stock I'll sell you; cheap. But Seriously, taxes is/are the major subject here, and while we do get down to the nitty-gritty much of them time, there's no reason we can't have a laugh or two once in a while. After all, if you're crazy enough to be IN this business, you need all the help you can get this time of year. ChEAr$, Harlan Lunsford, EA n LA Sun 13 Mar 2005

Is this stock matching allowed?

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