Tax Reform Plan Puts The Squeeze On Securities Sales
When you sell securities, you currently have a choice of three methods of accounting for your capital gain for tax purposes: The first-in, first-out (FIFO) method, the last-in, first-out (LIFO) method, or you can pick specific lots of securities - choosing to sell 100 shares of a stock, a specific lot of shares purchased on a specific date.
The Senate-passed tax bill would limit you to using FIFO to account for your gains. If it gets adopted, which is expected, you'll always be required to use FIFO. Since investors often build securities positions in increments over decades and the shares bought earliest usually have the biggest gains, losing flexibility to choose which accounting method is applied to your capital gains is not good news. But it seems likely this tax saving tactic will end after December 31, 2017.