Specific identification method
This cost basis recordkeeping method could help you reap the greatest tax benefits—if you're willing to put in the time.
How it works
You select the exact shares you want us to sell or transfer. The transaction will appear on your statement as SpecID.
If you plan to use this method for shares currently using the average cost method, we encourage you to plan ahead as you must elect out of average cost in writing before making the trade and it takes one business day to make specific identification data available for display online.
Why you might prefer the specific identification method
This method provides the most flexibility for tax planning strategies.
A few things to consider
Be prepared to be hands-on
This method requires more effort: Generally, you must specify before the setlement date the shares to be sold or transferred and Vanguard must confirm those specifications back to you within a reasonable time.
We try to make this easier by giving you quick online access to the potential gain or loss for each share or lot.
More recordkeeping may be required
For noncovered mutual fund shares, we'll continue using average cost to track the cost basis. If you're eligibile to use specific identification for noncovered shares, you'll need to use your records to specify the shares to be sold as we only have the average cost basis available.
For other noncovered shares, we'll report the shares you specify and can confirm the shares you specify back to you in a letter.
We won't report cost basis for noncovered shares to the IRS.
You remain responsible for reporting your cost basis information to the IRS every year on Form 1040, Schedule D, for all shares sold, whether they're covered or noncovered. You should use your own records in addition to the cost basis information we provide.
In addition, for covered shares, the information you report in column (e) on Form 8949 must match what we send to the IRS on Form 1099-B.
Shares bought before the regulatory changes took effect on January 1, 2012 (or January 1, 2011, for stocks).
Cost basis reporting for noncovered shares will be sent to you alone; it will not be sent to the IRS.