What is the order in which ETFs/Shares are sold?

[mantooth]

Suppose I bought 10 shares of an ETF at 100$ and another 10 shares of that same ETF at 90$ at a later point of time. The average right now is 95$ for 20 shares.

A) Now if I sell 10 shares at 97$, will it be considered as a profit or a loss? Is the buying price considered or average price of that holding is considered?

B) The answer for A, does it depend on broker, exchange, ETF, shares or country of domicile etc?

C) If I sell another 10 shares at 93$, effectively I have sold everything at no profit or loss. But if I sell it in two different financial years, will I pay taxes? (Consider: same tax rate for all situations)

D) Will point C, depend upon tax rules of different countries.

 

[ineedyougod]

@mantooth It largely depends on the country. AFAIK most use FIFO (first in, first out: you sell first your oldest shares), but others use LIFO (last in, first out: you sell first your newest shares), weighted average (purchase price is the average cost) or even low or high first (you sell first your lower or higher purchase price shares).

 

[nishan]

@ineedyougod Purely out of interest, do you know any of the countries which allow LIFO? It's generally frowned up in accounting, if not outright disallowed. Not disputing your answer just genuinely curious. It's quite advantageous for the investor.

 

[ineedyougod]

@nishan AFAIK you can use LIFO in the USA. Probably the only country where you can use it, though.

 

[inthefold]

@ineedyougod As someone who is in the US, you can use LIFO but you have to specify this method. The default among most brokerages is FIFO.

 

[herbiggestfan]

@nishan UK is almost like this because you need to match same-day trades first, then trades within 30 days of eachother, then finally use the pooled average cost.

 

[mayajoy]

@mantooth You can choose how it's assigned. Somewhere on your broker's site you should be able to set a default, and you can override specific transactions to assign to specific opening trades. Note this has to be done before settlement, which is T+1 or T+3.

 

[wrd]

@mantooth It depends on the broker, in IB you can decide