Cost Valuation Methods: FIFO, LIFO, Identified Shares

What this video covers

• Why first-in, first-out (FIFO) is the universal default when a question does not specify a method, and how to recognize that exam trap
• How FIFO sells oldest shares first and why it produces the largest taxable gain in a rising market
• How last-in, first-out (LIFO) sells newest shares first and why it produces the smallest taxable gain in a rising market
• What specific identification is, and why the investor must notify the broker no later than the settlement date to use it
• How specific identification lets an investor choose any tax lot for strategic tax planning, including substituting lots after execution but before settlement
• How the side-by-side comparison of FIFO, LIFO, and specific identification flips between rising and declining markets
• Why the chosen method affects both the dollar amount of the gain or loss and whether it is short-term or long-term