528. How are securities that are sold or transferred identified for tax purposes?Nuco Employeercline202014-07-25T17:30:00Z2014-07-25T17:30:00Z25443103UMKC257364014Site Map/General Income Taxation/Individuals/Rates/Capital GainsTaxFactsDefaultArticle2007-01-30T00:00:00Z123891418-00-tf2.xml1418.00;#1742;#0x010100C568DB52D9D0A14D9B2FDCC96666E9F2007948130EC3DB064584E219954237AF3900242457EFB8B24247815D688C526CD44D009C4E67E972694125ABDA91AC61F5E51FTax Facts 2How are securities that are sold or transferred identified for tax purposes?7700.00000000000TaxFactsDefaultArticleSBMEDIA\moss-admin2010-01-14T22:11:28Z528. How are securities that are sold or transferred identified for tax purposes?When an individual sells or otherwise transfers securities (i.e., stocks, bonds, mutual fund shares, etc.) from holdings that were purchased or acquired on different dates or at different prices (or tax bases), he must generally be able to identify the lot from which the transferred securities originated in order to determine his tax basis and holding period. If he is unable to adequately identify the lot, he will usually be deemed to have transferred the securities in the order in which they were acquired, by a “first-in, first-out” (FIFO) method.Treas. Reg. §1.1012-1(c)(1). However, in cases involving mutual fund shares he may be permitted to use an “average basis” method to determine his tax basis and holding period in the securities transferred (see Q 7857).Generally, identification is determined by the certificate delivered to the buyer or other transferee. The security represented by the certificate is deemed to be the security sold or transferred. This is true even if the taxpayer intended to sell securities from another lot, or instructed his broker to sell securities from another lot.Treas. Reg. §1.1012-1(c)(2).There are several exceptions to the general rule of adequate identification. One occurs when the securities are left in the custody of a broker or other agent. If the seller specifies to the broker which securities to sell or transfer, and if the broker or agent sends a written confirmation of the specified securities within a reasonable time, then the specified securities are the securities sold or transferred, even though different certificates are delivered to the buyer or other transferee.Treas. Reg. §1.1012-1(c)(3)(i). If the securities held are United States securities (Treasury bonds, notes, etc.) recorded by a book-entry on the books of a Federal Reserve Bank, then identification is made when the taxpayer notifies the Reserve Bank (or the person through whom the taxpayer is selling the securities) of the lot number (assigned by the taxpayer) of the securities to be sold or transferred, and when the Reserve Bank (or the person through whom the taxpayer sells the securities) provides the taxpayer with a written advice of transaction, specifying the amount and description of securities sold or transferred.Treas. Reg. §1.1012-1(c)(7); Rev. Rul. 71-21, 1971-1 CB 221.Another exception arises when the taxpayer holds a single certificate representing securities from different lots. If the taxpayer sells part of the securities represented by the certificate through a broker, adequate identification is made if the taxpayer specifies to the broker which securities to sell and if the broker sends a written confirmation of the specified securities within a reasonable time. If the taxpayer sells the securities himself, then there is adequate identification if he keeps a written record identifying the particular securities he intended to sell.Treas. Reg. §1.1012-1(c)(3)(ii).A third exception occurs when the securities are held by a trustee, or by an executor or administrator of an estate. An adequate identification is made if the trustee, executor, or administrator specifies in writing in the books or records of the trust or estate the securities to be sold, transferred or distributed. (In the case of a distribution, the trustee, executor, or administrator must also give the distributee a written document specifying the particular securities distributed). In such a case, the specified securities are the securities sold, transferred or distributed, even though certificates from a different lot are delivered to the purchaser, transferee or distributee.Treas. Reg. §1.1012-1(c)(4).