Buying and Selling shares?

Question

I bought a company's stock at 3 different price points- when I sell the shares(say 1/3rd) which shares get sold first-or do I have a option to say which shares get sold first? thanks

Answer 1

So, for you, it really doesn't matter which shares you sell.  

Lot 1, 10 shares at 10.

Lot 2, 10 shares at 20.

Lot 3, 10 shares at 30.  

You now sell 10 shares at 50.  You have $50 in your pocket, regardless of which lot is technically sold.

It matters for tax purposes.  Because you can have a gain of of $40, $30, or $20.  The larger the gain, the more you pay in tax.

IF you don't specific to your broker, IRS automatically assume First in first out.  So, in this case, you're selling the $10 shares.  However, you CAN tell your broker to sell a specific lot (You want to sell vs a specific purchase date).  This way, you can sell lot 3, and realize only a $20 profit.  This should be done the time you give the order, and be printed on the confirmation.

Answer 2

If the stock is held at a brokerage firm, they don't treat you shares in lots, it's just one total number.   So when you sell it, they just reduce your total position by the amount sold.

HOWEVER, for tax purposes the Service expects you to use 1st in 1st out.

But if you want to use another lot, when you put your sell order in you can add a not - "versus purchase of 00/00/08  (you enter the date) and this would be accepted by IRS.

I hope this answered your question to your satisfaction

Answer 3

You do not have the option nor is it FIFO (First in First out)Your shares have a total cost base which is equal to the total which you paid for them devided by the number of shares.  When you sell the shares you use that as the cost of the shares.  

Example

Buy 100 shares @ 10.00 for 1000.00

Buy 100 shares @ 9.50 for 950.00

But 100 shares @ 9.27 for 927.00

Total Shares 300 total cost = 2,877.00

You now own 300 shares at an ACB (adjusted cost base) of 2,877 or 9.59/share.  When you sell the shares you will use 9.59 as your cost base.