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Reply to @bilvihur: I'm sorry we are not on the same wave length. What in the world are you talking about ? Covered calls vs. naked calls ?????????????????????????? Regards, Ted
Short answer - no, covered vs. uncovered doesn't matter. (Covered mutual fund shares are shares covered by cost basis reporting requirements, which for mutual funds applies to shares purchased after Jan 1, 2012.)
Longer answer - if you're using actual cost (vs. average cost), then you can pick and choose the shares you sell (e.g. selecting the highest cost ones to minimize the gain realized), and covered vs. uncovered doesn't matter.
But if you're using average cost, then (unless your broker is the 1 in 1,000 who elected to do this differently) your covered shares and uncovered shares each have their own average cost. You'll want to sell from one bucket or the other depending on which average is higher (or lower, if for some reason you want to realize more gain now).
Even for covered shares, it is your responsibility to get the cost basis right. What the broker/fund company reports to the IRS may not be correct (e.g. if you had a wash sale across multiple accounts).
Longer answer - if you're using actual cost (vs. average cost), then you can pick and choose the shares you sell
msf,
is "actual cost" and specific identification, the same? I am assuming it is as to "pick and choose the shares" I think you would need to use the Specific Identification cost basis method.
Short answer (I seem to be creating a pattern for my responses here) - yes, basically.
Longer answer - everyone has made a mess of things by conflating two simple questions: which shares did you sell, and what did they cost?
For example, the IRS, in Pub 550 says that specific share identification and FIFO are two methods of determining cost basis. Actually, they're two different ways of identifying the particular shares sold; the cost basis in either case is the actual cost (what the Pub calls adjusted basis).
Regardless of what the broker/fund company/IRS calls the choices (e.g. DFA allows you to specify FIFO, LIFO, HIFO (highest first), etc.), everything comes back to the two questions: which shares, and what did those shares cost?
Every "method" (FIFO, LIFO, etc.) except average cost, identifies the specific shares sold (i.e. they pick and choose in a broad sense). But they're not necessarily called "specific share identification". Regardless, every method except average cost, requires you to use "actual cost" (adjusted basis).
I was trying to use the phrase "actual cost" to mean the cost basis calculation (answering the second question - how much did the shares cost), independent of the method used to select those shares.
Comments
Regards,
Ted
Regards,
Ted
Longer answer - if you're using actual cost (vs. average cost), then you can pick and choose the shares you sell (e.g. selecting the highest cost ones to minimize the gain realized), and covered vs. uncovered doesn't matter.
But if you're using average cost, then (unless your broker is the 1 in 1,000 who elected to do this differently) your covered shares and uncovered shares each have their own average cost. You'll want to sell from one bucket or the other depending on which average is higher (or lower, if for some reason you want to realize more gain now).
Even for covered shares, it is your responsibility to get the cost basis right. What the broker/fund company reports to the IRS may not be correct (e.g. if you had a wash sale across multiple accounts).
Regards,
Ted
http://www.vanguard.com/us/help/FAQCostBasisContent.jsp
is "actual cost" and specific identification, the same? I am assuming it is as to "pick and choose the shares" I think you would need to use the Specific Identification cost basis method.
Mona
Longer answer - everyone has made a mess of things by conflating two simple questions: which shares did you sell, and what did they cost?
For example, the IRS, in Pub 550 says that specific share identification and FIFO are two methods of determining cost basis. Actually, they're two different ways of identifying the particular shares sold; the cost basis in either case is the actual cost (what the Pub calls adjusted basis).
Regardless of what the broker/fund company/IRS calls the choices (e.g. DFA allows you to specify FIFO, LIFO, HIFO (highest first), etc.), everything comes back to the two questions: which shares, and what did those shares cost?
Every "method" (FIFO, LIFO, etc.) except average cost, identifies the specific shares sold (i.e. they pick and choose in a broad sense). But they're not necessarily called "specific share identification". Regardless, every method except average cost, requires you to use "actual cost" (adjusted basis).
I was trying to use the phrase "actual cost" to mean the cost basis calculation (answering the second question - how much did the shares cost), independent of the method used to select those shares.