Replies to post #5922 on A.I.M. Users Bulletin Board (AIMUSERS)

[Toofuzzy]

Hi Karel: Re: Tax accounting

1)the IRS says you can do whatever you want(but you need to tell your broker which shares you are selling) Telling your "discount" broker which shares you are selling is "usually" imposible, at least online.

2)If you own mutual funds they "usually" figure out average cost for you but I would not want to have to check their calculations which is why I never used that method.

3)I have for the most part used last in first out because 1)those are "usually" my most expensive shares and 2) I keep my records on graph paper and I get to wipe out one line of purchases that way.

4)Since we are all using AIM, picking which shares we want to sell allows us to sell the most expensive shares and never sell the cheap ones.We can take a lot of tax losses that way and some of the cheapest shares we may never sell.

5) The IRS allows you to use FIFO, LIFO, Ave Cost,or to choose whatever lot you want to sell. They do want you to stick to whatever method you choose (forever)and for ALL your holdings.They also want your broker to designate which lot you are selling which means you have to tell them. I just keep "really really" good records of what my choice is(just in case it is questioned) since my broker does not have a way for me to designate "lots" online.

Hope this is not
Toofuzzy

Take the road less traveled. It will make all the difference.

[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