How Same Lot Selection Affects Close Transactions for Trades
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How Same Lot Selection Affects Other Close Transactions
Same lot select
How Same Lot Selection Affects Global Processes
Consider the following scenario with wash sale processing where a sale of 1000 shares produced a $10,000 loss that qualifies as a wash sale for tax purposes. The remaining lots appear as follows in each basis.
GAAP Basis: No Wash Sales | |||
|---|---|---|---|
Lot Number | Quantity | Original Cost | Current Cost |
1 | 1,000 | 10,000 | 10,000 |
2 | 1,000 | 15,000 | 15,000 |
3 | 1,000 | 12,000 | 12,000 |
USTAX Basis: Wash Sales Disallowance Results in $20,000 Current Cost for Lot 1 | |||
|---|---|---|---|
Lot Number | Quantity | Original Cost | Current Cost |
1 | 1,000 | 10,000 | 20,000 |
2 | 1,000 | 15,000 | 15,000 |
3 | 1,000 | 12,000 | 12,000 |
Sell Shares without Same Lot Selection
Now assume that you are not using same lot selection processing. If the system processes a subsequent sale for 1,000 shares with a lot selection method of high current cost for each basis, the system selects lot 2 in the GAAP basis, but selects lot 1 in the USTAX basis due to the modified cost of $20,000.
In the GAAP basis, lots 1 and 3 remain. In the USTAX basis, lots 2 and 3 remain. The lot structure across the bases is no longer in sync.
GAAP Basis: Holdings After Processing Sell | |||
|---|---|---|---|
Lot Number | Quantity | Original Cost | Current Cost |
1 | 1,000 | 10,000 | 10,000 |
2 |
|
|
|
3 | 1,000 | 12,000 | 12,000 |
USTAX Basis: Holdings After Processing Sell | |||
|---|---|---|---|
Lot Number | Quantity | Original Cost | Current Cost |
1 |
|
|
|
2 | 1,000 | 15,000 | 15,000 |
3 | 1,000 | 12,000 | 12,000 |
Sell Shares Using Same Lot Selection
This scenario assumes the same holdings remain before a sell, but in this case the system used same lot selection.
Assume that you previously set up the entity to assign a controlling and a non-controlling accounting basis, as follows:
NON-CONTROLLING BASIS. Primary basis is GAAP, and does not use wash sale processing.
CONTROLLING BASIS. Secondary basis is USTAX, and uses wash sale processing.
In this instance, the system processes a subsequent sale for 1,000 shares with a lot selection method of high current cost for each basis, The system first determines the lot selection results for the controlling basis, USTAX. It then attempts to relieves the lots for the non-controlling basis, GAAP, using the same lots that it relieved for the controlling basis. The system relieves lot 1 in the USTAX basis and relieves the same lot in the GAAP basis.
In the GAAP basis, lots 2 and 3 remain. In the USTAX basis, lots 2 and 3 remain. The lot structure across the bases is in sync.
GAAP Basis: After Processing Sell | |||
|---|---|---|---|
Lot Number | Quantity | Original Cost | Current Cost |
1 |
|
|
|
2 | 1,000 | 15,000 | 15,000 |
3 | 1,000 | 12,000 | 12,000 |
USTAX Basis: After Processing Sell | |||
|---|---|---|---|
Lot Number | Quantity | Original Cost | Current Cost |
1 |
|
|
|
2 | 1,000 | 15,000 | 15,000 |
3 | 1,000 | 12,000 | 12,000 |
If you use Position Viewer to review the close lots in this scenario, the 1,000 shares sold in the USTAX controlling basis show a lot selection method of HCLOT for highest current cost. The 1,000 shares sold in the GAAP non-controlling basis show a lot selection method of SMLOT, indicating that the system used same lot selection processing to relieve the same lots used to relieve the controlling basis.