by Anura Guruge
on January 7, 2022
NO. NO. There is no hanky-panky here or anything even vaguely illegal or even slightly unethical. All perfectly above board & totally kosher — IRS approved.
This comes into play when you have stock (or other assets (such as ETFs or mutual fund shares)) that you have bought at different times — ideally over a long stretch of time. If so, what you paid to buy those assets, at different times, are likely to be different — in many instances, very different. But, you bought them & as such YOU can SELL them. Moreover, you can specify which ones you want sold at a given time to give YOU the BEST cost basis (i.e., minimize the capital gains you accrue).
To make this as easy & as simple as possible, Fidelity, as you can see from the top image, offers a ‘SELL SPECIFIC’ option. That is neat & works real well. When you invoke it you get a list of all the shares, when you bought them & their current value in terms of capital gains or losses. You can then select the ones you want to sell. BINGO. You get the BEST cost basis you can & are entitled to.
Sometimes you might NOT be able to use ‘SELL SPECIFIC’. I ran into that yesterday — for arcane reasons too obscure to relate. So, I just sold the x number of shares I needed to sell at the THEN PRICE. It would be three days prior to settlement. During that window I can tell Fidelity what shares I want sold. In essence, it is SELL SPECIFC retroactively. Nothing illegal. I still sold x shares. I just didn’t specify, at the time, which shares they should be. And that is why we have a delayed settlement date.
Today, was the first time I had asked for this cost basis adjustment. You can’t do it online. It has to be done by the back-office & takes over a day. But, they assure me that it works. I trust them.
So, just letting you know. Basically, you can do ‘SELL SPECFIC’, after the fact, as long as you do it before settlement. All the best.
