A.I.M. Users Bulletin Board

[Bernie Goldberg]

Hi,
Computing, calculating (whatever you want to call it) the average cost of shares of stock has absolutely nothing to do with capital gains or any other taxes.
I didn't mention average cost per share as a method of reporting to the government because it is a method that is hardly ever used for individual stocks.
It is used quite often with mutual funds and it can be used in MS Money and Quicken I am sure.
The reason that I favor FIFO (especially in conjunction with AIM), is that in our( U.S.) system long term capital gains which are investments that are held over one year are treated quite favorably as far as taxes are concerned. Long term Capital gains are taxed at a rate that is anywhere from 20% to 50% less than other forms of income.
It must be obvious that if you sell the First shares that you have bought you will be selling the shares that have the best chance of being held for more than a year, thereby receiving the most favorable tax rate.
Bernie