It seems to make sense, but

[LonnieTheKingpin]

can anyone confirm or deny:

If you have two lots of the same stock - one at a loss and the other at a gain - and you want to take some of your profit, should you always sell your shares from the lot at a loss first (provided you're out of wash sale territory, in which case I'd think it wouldn't matter) ?

[Fredledingue]

No, you can't have two lots of a same stock. When you buy more of a same stock they are added/mixed with the old ones.
It makes no difference which one you sell and you would not be able to choose which one to sell since they are all the same things.
Imagine you have two $100 banknotes in your pocket. Does it make sens to spend one note rather than the other? No, of course. In both case you spend 100 dollars. Same with stocks.

[LonnieTheKingpin]

Thanks for the reply Fred. But I'm not sure how they can be the same thing if they're purchased and sold at different times for different prices.

Let's say that X is trading at $60, and that I bought 500 shares in November 2006 for $100 and 100 shares in March 2009 for $40.
If I decide to sell 50 shares, I have the following options:

Tax Lot - PreferenceDescription

First In, First Out
- Open lots with the earliest opening dates are selected. This is the
default selection.

Last In, First Out
- Open lots with the latest opening dates are selected.

Maximize Loss
- Open lots are selected to maximize losses (or minimize gains if they
are unavoidable). No preference is given to either short- or long-term
lots.

Maximize Gain
- Open lots are selected to maximize gains (or minimize losses if they
are unavoidable). No preference is given to either short- or
long-term lots.

Minimize Long-Term Gain
- Open lots are selected to maximize long-term losses (or minimize
long-term gains if they are unavoidable). Lots held for a year or
longer are considered long term.

Minimize Short-Term Gain
- Open lots are selected to maximize short-term losses (or minimize
short-term gains if they are unavoidable). Lots held for less than a
year are considered short term.

Maximize Long-Term Gain
- Open lots are selected to maximize long-term gains (or minimize
long-term losses if they are unavoidable). Lots held for a year or
longer are considered long term.

Maximize Short-Term Gain
- Open lots are selected to maximize short-term gains (or minimize
short-term losses if they are unavoidable). Lots held for less than a
year are considered short term.

Lot Selection
- Choose this preference if you'd like to specify lots at the time of
order placement. If you do not specify lots, they will be selected on
a First In, First Out basis.



Of course, if I sold all 600 shares, then it wouldn't make a difference as you demonstrated with you example of the 2 $100 bills. I have $36K. I lost $18K.

But, unlike my 600 shares, that $200 is in my pocket, and therefore after tax. There's no unrealized long-term/short-term gain/loss to calculate. If I sell 50 shares of X, on the other hand, the cost basis depends on which shares I'm selling.

Unless I'm missing something.

[Stocktrading101]

I think it is automatically presumed that your sale is of the original shares. You can't pick and choose which lot you are selling from if they shares are all being held under one account.

For example, let's I buy 100 shares on Jan 1st, then 100 more on June 1st. I now have 200 shares total in one lot (Fredledingue example). If I decide to sell 50 shares in August the sale is based on the Jan 1st purchase, not June 1st.

To confirm I would simply ask your broker .

[777twist]

I don't quite understand it either, but I was under the impression that you could (for tax purposes) select various options when you sell (as in FIFO, ect... what Lonnie posted). But again, I'm not that far into this where I'm squeezing every dime out I can. And I think this is what this comes down to.

If you do find the answers, please post them.