First In, First Out Method

This is the default method to figure shares you sold if both of these apply:

  • You held your shares in a brokerage account.
  • You didn’t specify a method when you sold your shares.

With the first-in, first-out method, the shares you sell are the first ones you bought. Since the market usually goes up over time, you’ll get a bigger gain by selling shares you bought using the first-in, first-out method. You might have held the shares for various lengths of time. If so, you might get favorable long-term capital gains treatment by selling the shares you bought first.

If you want to sell shares other than these, you must identify the shares in writing before the sale. The broker must also send you a confirmation that those shares will be sold.

Related Topics

Related Resources

7 Ways to Generate Passive Income

Earn extra income by setting up a plan that will earn money as time goes on – even when you are not physically working. Learn more at H&R Block.

Adjusted Basis

Learn more about the adjusted cost basis method of selling shares and get tax answers at H&R Block.

Incentive Stock Options (ISO)

Learn more about Form 3921 and incentive stock option rules with the tax experts at H&R Block.

Tax Implications of a Dividend

Learn more about dividends and how they affect your taxes from the experts at H&R Block.