Stupid stock related question...

[slycat]

I have an ameritrade acct and have trouble understanding this.

example:

-i buy 100 shares of ABC at $50 last year.
-i buy another 100 shares of ABC at $65 last week.

Today I sell 100 shares at $70...ok?well and good. But, my question is which 100shares did i sell? The 100 i got last week or the 100 i got last year?

Do they average it out and then it don't matter anymore or what?...coz somehow i was thinking i wanna sell the ones i got for $65 and keep the ones i got for $50...

yes?..no?...i'm confused.

 

[jaybert]

why would it matter? It could be 100/0, 50/50 99/1, its all the same.

 

[Cuda1447]

It doesn't really matter...

 

[FoBoT]

.

 

[amoeba]

uh.....maybe you should stay off the crack before you buy stocks.

 

[Rudee]

It doesn't matter when you purchased them. It's the selling price that matters, whether you purchased them for more or less/

 

[TuxDave]

Why would it matter?

Bottom line is that you now own 100 shares of ABC
And a net of $4500 has left your pocket.

 

[yhelothar]

It doesn't matter... All 200 of your stocks are worth the same value, so there's no difference.

 

[Gunslinger08]

<another comment to point out your stupidity in asking this question>

 

[z0mb13]

Originally posted by: amoeba
uh.....maybe you should stay off the crack before you buy stocks.

 

[Len12345]

he wants to know how much of a capital gain to report, but I dont know which to take, probably an average

 

[AgaBoogaBoo]

The ones you bought a year ago went up in value, so they're all worth the same

It doesn't make a difference which ones you sell

 

[amoeba]

Originally posted by: Len12345
he wants to know how much of a capital gain to report, but I dont know which to take, probably an average

ah, then my crack comment was unwarranted.

apologies.

 

[TuxDave]

Originally posted by: Len12345
he wants to know how much of a capital gain to report, but I dont know which to take, probably an average

Oh... like on an accounting standpoint? Beats me....

 

[dinkhunter]

obviously you pick the one with the least capital gains.

 

[nineball9]

Yeah - it's capital gains. AFAIK, you can simply declare at tax time what you sold - either the 100 at $50/share or the 100 at $65/share, or some mixture of the them. You can minimize capital gains this time by declaring "bought at $65, sold at $70".
However, your capital gains in the future will be higher for the remaining "bought at $50, sold at $70" shares, unless the stock's NAV decreases.
A tax preparer or financial advisor will (hopefully) have the correct answer.

 

[slycat]

see i always thought like i wanna sell off the ones thats making less moola and keep the ones that making more...something like that?

 

[z0mb13]

Originally posted by: amoeba

Originally posted by: Len12345
he wants to know how much of a capital gain to report, but I dont know which to take, probably an average

ah, then my crack comment was unwarranted.

apologies.

 

[TuxDave]

Originally posted by: slycat
see i always thought like i wanna sell off the ones thats making less moola and keep the ones that making more...something like that?

Is that for a 'feel good' feeling or for your bookkeeping?

 

[XZeroII]

100*50 = 5000
100*65 = 6500

You have 200 shares worth $11500

11500/200 = 57.5

You now have 200 shares which you bought at $57.50 per share.

You sold 100 @ 70 = 7000

You now have 100 shares worth 4500

4500/100 = $45

You now have 100 shares which you bought at $45 per share.

 

[TuxDave]

Originally posted by: XZeroII
100*50 = 5000
100*65 = 6500

You have 200 shares worth $11500

11500/200 = 57.5

You now have 200 shares which you bought at $57.50 per share.

You sold 100 @ 70 = 7000

You now have 100 shares worth 4500

4500/100 = $45

You now have 100 shares which you bought at $45 per share.

The math is right, but I think your bookkeeping methods are off. The price that you bought the stock at is set when you buy it. You don't keep adjusting the effective average price in your books. You then assign a value to the stock ONLY upon its sale. Prior to that, the stock is just 200 shares. CPA? Anyone?

 

[tk149]

Originally posted by: dinkhunter
obviously you pick the one with the least capital gains.

Actually, I would suggest that you use that only if you expect your income to remain fairly steady for as long as you hold the rest of the stock, and if the stock continues to increase in value. If you take the least capital gains now, and if your income increases dramatically before you sell the rest of your stock, you'll end up paying a much higher tax rate on those gains.

Somebody correct me if I'm wrong. CPA?!?! Where are you?

 

[glenn1]

-i buy 100 shares of ABC at $50 last year.
-i buy another 100 shares of ABC at $65 last week.

Today I sell 100 shares at $70...ok?well and good. But, my question is which 100shares did i sell? The 100 i got last week or the 100 i got last year?

Next time you do a sale tell your broker you want to versus purchase the sale against one of the tax lots, that way you can pick which it's applied against. They'll put a confirm note on there saying it was against one tax lot or the other.

To answer your question, if you didn't request a versus purchase you can still apply it against either. Brokerage firms are only required to provide proceeds from security sales to the IRS (form 1099B), not your cost basis, so the IRS won't know what tax lot you sold either until you tell them on your Schedule D. Of course if you get complimentary cost basis reporting on your statement you'll want to make sure they sold the "right" lot as far as you're concerned so you can keep score going forward. Most broker/dealers report cost basis via FIFO (First In, First Out) unless you specify otherwise with a versus purchase. You can call your advisor to have them make the switch in reporting for your statements.

 

[notfred]

If you don't understand that, you're not qualified to invest in stocks.

 

[DaveSimmons]

Sheesh, a lot of people here who know nothing about selling stocks. I know next to nothing since I buy and hold mutual funds instead, but maybe this will help.

First off, there are "short term" and "long term" capital gains, and the taxes you pay on short term gains are much higher. Right now the tax rate on long term gains is only 15%.

Consider the choices:
1. You claim the oldest purchase, $20 profit at 15% rate = $3, and your remaining shares only have $5 profit locked in at the current value which means $0.75 in future taxes. Taxes = $3.75.

2. You claim the recent purchase, $5 profit at 30% rate = $1.50, but your remaining shares have $20 in profit at the current value, which means $3 in future taxes. Taxes = $4.50.

None of this matters for an IRA since Roth grows tax-free and Traditional grows tax-free, and neither requires this kind of accounting.

I believe unless you come up with an alternative method, document it, and (always?) use it, the rule is first-in, first-out anyways. But I just buy mutual funds so I haven;t studied it carefully.