2 year ago, I bought 1,000 shares of AAA at $3. This year I sold 500 shares of AAA at $5 making a profit of $1,000. However later in the same tax year and regretting my earlier trade, I bought back 500 shares of AAA at $5. Question: Do I have to declare a profit of $1,000 to ATO, or not since my net position in AAA has not changed? What if I had bought 500 shares back at $6?
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Taxpayers choice to choose stocks from whatever parcel, does not have to be FIFO or average.
Correct.
However the purchase date has to be before the sale date, I think he was Wanting to know whether he could use the shares he bought as replacement for the cost base in calculating the capital gain.
i think that it is confusing to conflate net position with actual buy/sell events. The net position in your example has nothing to do with the tax events that have occured.
Agreed, the net position did not change in your example. But, a Capital Gains event did occur (so the ATO want to know about that).
For clarification on your 1st post, even if the 'replacement' parcel cost $10 each, then you still have made a $1K taxable profit on the sell.
Hope that helps. (fungible is the word)
Not advice.
Buy and sell contracts have dates on them.
So if you buy shares on Jan 10th for $1, and then sell them on Feb 10th for $2 you have made a $1 capital gain.
It does not matter that you rebought them for $2 in March, that is counted as a new transaction.
You obviously can’t say that in Feb you sold the shares That you bought in March.
On the swapping and changing thing I dunno. Personally I cannot imagine it would make a whole lot of difference UNTIL you are carrying forward a tax trading loss (then there are some advantages to parcel picking). But I do not know the answer to your question.
Record keeping is the key, and may determine what method is used.
I have only ever done parcel picking as it suits my record keeping setup. Each line in my 'HELD' records is a single buy parcel with the costs/dates involved in that buy. I just usually make sure that when I sell, I sell a complete parcels worth. This way I can wipe out a complete line from the Held section, and just transfer the complete line of parcel records from my 'HELD' page and into my 'SOLD' page. Add the selling costs/price/date and my Sold page then calculates my profit/loss for tax purposes (simplified explanation).
Buying in multiple 'round number' lots makes this easier - like all buys are 10,000 shares for a certain company.
fifo mixed with picked parcels if you want
But need an accountant confirmation
Yeah, you can pick which ever parcel of shares you owned at the time of the sale to count as your cost base.
But you have to have owned them on he day you sold.
For example, this year I bought 44,000 Fmg shares at $5.50 as a short term trade, I wrote a call on them and sold them 6 months later for $6.42.
Having only owned the parcel for 6 months I didn’t qualify for the cgt discount, so at tax time I will select some of my older shares that I purchased for around $5 to use.
That way I pay a little less tax due to the discount, and clear an extra $0.50 of taxable gain from my future sale.
How does it work for a short seller?
CGT Question
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galumay
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Yes, once you realise the profit you have to declare it for CGT. It makes no difference what you buy subsequently, be it the same company or another one, for any price.
galumay
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I think its safe to assume the ATO can access, if you want to break the law and hope they dont, then, sorry, but I hope they catch you.
Evening,
ATO has pretty good worked examples for this. Your choice how you deal with whatever parcel you sell (fifo or selecting a particular parcel/part parcel pro rata). ATO does not determine this (see ATO web-site).
In your example you sold half a parcel - so cost base for sale is half original cost base. The sale triggered a capital gains event for taxation purposes (see ATO web-site for examples)
ATO has pretty good worked examples for this. Your choice how you deal with whatever parcel you sell (fifo or selecting a particular parcel/part parcel pro rata). ATO does not determine this (see ATO web-site).
In your example you sold half a parcel - so cost base for sale is half original cost base. The sale triggered a capital gains event for taxation purposes (see ATO web-site for examples)
So_Cynical
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Taxpayers choice to choose stocks from whatever parcel, does not have to be FIFO or average.
Value Collector
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Correct.
However the purchase date has to be before the sale date, I think he was Wanting to know whether he could use the shares he bought as replacement for the cost base in calculating the capital gain.
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For
If i buy 100 AAA at $3 then another 200 AAA at $4
If i sell 100AAA, i can choose the ones i sell from whichever buy parcel, but in the given example in the question, no choice
Profx made a $1000 cg and needs to be taxed on it
Anything else is just trying to fraud
My 2c non professional view
Once i agree with VC
If i buy 100 AAA at $3 then another 200 AAA at $4
If i sell 100AAA, i can choose the ones i sell from whichever buy parcel, but in the given example in the question, no choice
Profx made a $1000 cg and needs to be taxed on it
Anything else is just trying to fraud
My 2c non professional view
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awww
Shares are homogeneous unlike real estate or art. If I replace what I sold earlier in the same tax year, my net position is unchanged. In real terms, I have not made any profit but I guess in accounting terms if you take it as 2 separate parcels I may have, so hence the question. But I suppose these days, you just can't ask a question and not expect people to jump in from the moral high ground and make spurious assumptions.
hey
i think that it is confusing to conflate net position with actual buy/sell events. The net position in your example has nothing to do with the tax events that have occured.
Agreed, the net position did not change in your example. But, a Capital Gains event did occur (so the ATO want to know about that).
For clarification on your 1st post, even if the 'replacement' parcel cost $10 each, then you still have made a $1K taxable profit on the sell.
Hope that helps. (fungible is the word)
Not advice.
Yes thank you, hardly surprising accountants would have a term for it. Had to look it up. I guess the other question is whether one can use a different cost base method for different share transactions in the same tax year or you've got to be consistent for all transactions?
Value Collector
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Buy and sell contracts have dates on them.
So if you buy shares on Jan 10th for $1, and then sell them on Feb 10th for $2 you have made a $1 capital gain.
It does not matter that you rebought them for $2 in March, that is counted as a new transaction.
You obviously can’t say that in Feb you sold the shares That you bought in March.
following what value collector said above - either method gives the same result for your example (because not enough is going on to make any difference in that example).
On the swapping and changing thing I dunno. Personally I cannot imagine it would make a whole lot of difference UNTIL you are carrying forward a tax trading loss (then there are some advantages to parcel picking). But I do not know the answer to your question.
Record keeping is the key, and may determine what method is used.
I have only ever done parcel picking as it suits my record keeping setup. Each line in my 'HELD' records is a single buy parcel with the costs/dates involved in that buy. I just usually make sure that when I sell, I sell a complete parcels worth. This way I can wipe out a complete line from the Held section, and just transfer the complete line of parcel records from my 'HELD' page and into my 'SOLD' page. Add the selling costs/price/date and my Sold page then calculates my profit/loss for tax purposes (simplified explanation).
Buying in multiple 'round number' lots makes this easier - like all buys are 10,000 shares for a certain company.
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My belief/ understanding is you can do as please
fifo mixed with picked parcels if you want
But need an accountant confirmation
Value Collector
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Yeah, you can pick which ever parcel of shares you owned at the time of the sale to count as your cost base.
But you have to have owned them on he day you sold.
For example, this year I bought 44,000 Fmg shares at $5.50 as a short term trade, I wrote a call on them and sold them 6 months later for $6.42.
Having only owned the parcel for 6 months I didn’t qualify for the cgt discount, so at tax time I will select some of my older shares that I purchased for around $5 to use.
That way I pay a little less tax due to the discount, and clear an extra $0.50 of taxable gain from my future sale.
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We all agree, chronology is key.
I also use this for cgt discount
I use pmgold and bboz as edge and can choose or not to select an old parcel which is more than a year old to access the cgt discount when i sell any
So it is worth using parcel choice wisely
I also use this for cgt discount
I use pmgold and bboz as edge and can choose or not to select an old parcel which is more than a year old to access the cgt discount when i sell any
So it is worth using parcel choice wisely
How does it work for a short seller?
Value Collector
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I have never actually sold any shares short, so I don’t much about it.