If you buy the same stock 3 different times over a 3 month period and then sell all of those shares together can you add the net cost of the 3 buys together and then report the sale as 1 transaction?

Answer 1

This is a "well, it depends" question. There are three kinds of capital gains: short-term (less than one year), long-term (one to five years) and super-long-term (over five years, if you bought the security after 2001). All three have different tax rates, so if the stock's purchase dates cross a capital gains threshold (say, the first purchase was 13 months ago, the second was 12 and the last 11) you have to split out the stock by capital gains class so you get taxed right on its sale. If all three buys were in the same capital gains class, you just add the purchase prices together and compare to the sale price to get the capital gain or loss. You didn't ask but I'll tell you anyway: if you sell only part of the stock, you can sell it two ways: Specific ID and FIFO. Specific ID is where you tell your broker, "sell 100 of the shares of Acme I bought on March 14, 2005." If you bought Acme on January 10, March 14 and September 9, all the prices would have been different, and since the price was highest on March 14 selling that stock first minimizes your capital gain. If you just tell the broker to sell 100 of your Acme shares, the IRS presumes you're selling the January 10 shares--first in, first out.