Specific-Identification Method in header of articles
Specific-Identification Method in content page of articles
If you don't specify your shares prior to selling them, the IRS will assume you used the first-in, first-out method. However, if you use the specific-identification method, you can identify the actual shares you want to sell. This might minimize your capital gain or maximize your loss.
The price of the stock or mutual fund shares you're selling might have fluctuated over the years. If so, using the specific-identification method could decrease the amount of tax you’ll owe. Base your decision on your tax situation.
To use this method:
Prior to or at the time of the sale, you must specify to the fund company or your broker exactly which shares you want to sell.
You must receive written confirmation from the fund company or your broker within a reasonable time. This confirmation will tell which specific shares you want to sell or transfer.
Ex: Kathy purchased 1,000 shares of a fund for $12 a share in 2008. She purchased another 500 shares of the same fund for $15 a share in 2009, and another 900 shares for $27 in early 2010.
In 2012, she decided to sell 900 shares at $26 a share and received a check for $23,400.
If she had used the first-in first-out method, she’d show a capital gain of $12,600: