Stock Sales in Senate Tax Bill

The Senate proposal only allows investors to determine the basis of stock sold using the oldest shares first which will generally produce larger capital gains in a rising stock market. This method is termed the first in first out method or FIFO. The other method currently allowed is to direct the broker to sell shares purchased on a certain date or the specific identification method. The Joint Committee on Taxation believes the elimination of the specific identification method will generate an additional $2.7 billion more in taxes over a 10 year period. For taxable mutual funds, the use of the average cost method will still be allowed under the Senate proposal. The change would take effect January 1, 2018.

Reporting on Stock Sales

For the first time, brokers will be required to report the customer's adjusted basis in stocks and bonds purchased after 2010 and whether or not the gain or loss is short-term or long-term for security sales. Before they only had to report the gross proceeds of the sales. This requirement doesn't cover mutual funds and stock acquired through reinvestment plans until after 2011.