Question
How does FIFO compare to the Specific ID Sell Method?
Answer
FIFO (first in, first out) is the default method used when selling securities by brokerages, the IRS and GainsKeeper. FIFO sells your oldest lots first. The Specific ID method allows you to specify which shares you are selling. In order for the IRS to recognize a Specific ID sell, you must, at the time of the sell transaction, tell your broker which shares to sell by referencing the purchase date and purchase price. Your broker must then respond to you with a written confirmation of these instructions. This means you cannot decide during year-end tax preparation which lots were sold by Specific ID. You must specify a Specific ID sell method at the time of the sell transaction. If you don't, the sell must be considered a FIFO sell. To record a Specific ID sell, go to GainsTracker>Record Trades. Select the security type and select the Sell by ID transaction. You will then be able to specify the shares you are selling.