Matching Trades on Schedule D
Consider the following example:
Your trade history shows the following trade transactions:
| 01/05/2006 |
Buy |
100 shares |
MSFT |
@ $25.00 |
$2,500.00 |
| 01/06/2006 |
Buy |
50 shares |
MSFT |
@ $24.00 |
$1,200.00 |
| 01/08/2006 |
Sell |
50 shares |
MSFT |
@ $26.00 |
$1,300.00 |
| 01/09/2006 |
Sell |
100 shares |
MSFT |
@ $27.00 |
$2,700.00 |
|
This would result in the following 3 line items on schedule d:
| (a) Description of property |
(b) Date acquired |
(c) Date sold |
(d) Sales price |
(e) Cost or other basis |
(f) Gain (or loss) |
| 1) 50 sh. MSFT |
01/05/2006 |
01/08/2006 |
$1,300.00 |
$1,250.00 |
$50.00 |
| 2) 50 sh. MSFT |
01/05/2006 |
01/09/2006 |
$1,350.00 |
$1,250.00 |
$100.00 |
| 3) 50 sh. MSFT |
01/06/2006 |
01/09/2006 |
$1,350.00 |
$1,200.00 |
$150.00 |
- Please notice that the 50 shares sold on 01/08/2006 were not matched to
the 50 shares bought on 01/06/2006, but because of the IRS FIFO rule, these
were matched to those bought on 01/05/2006 (First bought get matched to first
sold). So part of the cost basis of the 100 shares goes to trade # 1 and
part goes to trade #2.
- Trade #2 is only for 50 shares because there were 50 shares left of those
bought on 01/05/2006 and these have to be matched to 50 of the 100 shares sold
on 01/09/2006.
- The same is true for trade #3 where the 50 shares left that were sold on
01/09/2006 now get matched to the 50 shares bought on 01/06/2006.
Now try matching the following securities transactions:
| 01/05/2006 |
Buy |
100 shares |
MSFT |
@ $25.00 |
$2,500.00 |
| 01/06/2006 |
Buy |
50 shares |
MSFT |
@ $24.00 |
$1,200.00 |
| 01/06/2006 |
Buy |
75 shares |
MSFT |
@ $23.00 |
$1,725.00 |
| 01/06/2006 |
Buy |
25 shares |
MSFT |
@ $22.00 |
$550.00 |
| 01/08/2006 |
Sell |
50 shares |
MSFT |
@ $26.00 |
$1,300.00 |
| 01/08/2006 |
Sell |
35 shares |
MSFT |
@ $24.00 |
$840.00 |
| 01/08/2006 |
Sell |
65 shares |
MSFT |
@ $23.00 |
$1,495.00 |
| 01/09/2006 |
Sell |
60 shares |
MSFT |
@ $28.00 |
$1,680.00 |
| 01/09/2006 |
Sell |
40 shares |
MSFT |
@ $29.00 |
$1,160.00 |
|
It starts out quite simple, but quickly gets complicated because each trade
is made up of buys and sells of unequal numbers of shares. So things need
to be broken up in the smallest number of shares, either on the buy side or the
sell side. This is quite common for the active trader, even for the
investor. How long would this rather simple list take you to match if you
were doing so manually? Or how complicated would your spreadsheet have
to be to accomplish this? We originally used an Excel spreadsheet for this
but found that even Excel is pushed to the limits when presented with such a
challenge.
Did you give up? Does your list of matched trades look anything like the following?
| (a) Description of property |
(b) Date acquired |
(c) Date sold |
(d) Sales price |
(e) Cost or other basis |
(f) Gain (or loss) |
|
1) 50 sh. MSFT |
01/05/2006 |
01/08/2006 |
$1,300.00
|
$1,250.00 |
$50.00 |
|
2) 35 sh. MSFT |
01/05/2006 |
01/08/2006 |
$840.00 |
$875.00 |
($35.00) |
|
3) 15 sh. MSFT |
01/05/2006 |
01/08/2006 |
$345.00 |
$375.00 |
($30.00) |
|
4) 50 sh. MSFT |
01/06/2006 |
01/08/2006 |
$1,150.00 |
$1,200.00 |
($50.00) |
|
5) 60 sh. MSFT |
01/06/2006 |
01/09/2006 |
$1,680.00 |
$1,380.00 |
$300.00 |
|
6) 15 sh. MSFT |
01/06/2006 |
01/09/2006 |
$435.00 |
$345.00 |
$90.00 |
|
7) 25 sh. MSFT |
01/06/2006 |
01/09/2006 |
$725.00 |
$550.00 |
$175.00 |
|
|
|
Totals: |
$6,475.00 |
$5,975.00 |
$500.00 |
This list took less than 1 second for TradeLog™ to generate.
Learn More... Wash Sales
Please note: This information is provided only as a general guide and is not to be taken as official IRS instructions. Armen Computing Ltd. does not make investment recommendations nor provide financial, tax or legal advice. You are solely responsible for your investment and tax reporting decisions. Please consult your tax advisor or accountant to discuss your specific situation.
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