Are Donated Shares FIFO?

[barrelomonkeys]

Hi everyone,

Long story short, I need to withdraw maybe $4-5k from our regular brokerage account.  We have VTI and VB in there, but pretty much all of the long-term (>1 year) purchases are in VTI.  My plan is to sell $4-5k of long-term VTI shares with SpecID that have a higher overall cost basis, and in the future donate some of this VTI to charity.  If I sell specific lots first and donate later, will it take my oldest shares first when I donate? (FIFO?).  Don't know why I'm having such a hard time finding an answer to this question.

Thanks in advance.

[Stimpy]

I think it depends on your broker.  I know mine are all FIFO.  So it would be best to ask them.

As a side note you can also sell lots not in FIFO order, but I believe you need to talk to your broker to set up that type of transaction.  (Or at least in the few brokers I've been with that was always the case.)

[seattlecyclone]

In the absence of broker instructions to the contrary, you should generally assume FIFO for sales and donations.

I know that when I'm transferring shares from Vanguard to my Vanguard DAF, I'm allowed to specify which shares I want. It shouldn't be that rare of a feature.

[MDM]

My plan is to sell $4-5k of long-term VTI shares with SpecID....

If your account uses SpecID for cost basis, you can designate specific share lots with their specific cost basis for donation.

[MustacheAndaHalf]

My plan is to sell $4-5k of long-term VTI shares with SpecID that have a higher overall cost basis, and in the future donate some of this VTI to charity.

You can save hundreds of dollars by doing something else.

If you sell, you owe tax on the $4k-5k.  For the median taxpayer that's in the 15% bracket, for $600 - $750 in taxes.  This event has nothing to do with donating money later.  The IRS will want their $600 - $750 if you follow your plan.

Instead, donate VTI shares directly to the charity, without selling.  The shares must be held over 1 year, but the IRS lets you avoid selling the shares.  You get a donation equal to the value of the shares when donated.  You don't pay tax on the shares - they aren't sold by you.

You might also look into a "Donor Advised Fund", which has a $5,000 minimum at Schwab and Fidelity.  That lets you donate a big chunk in one year, and take the donation in that year.  You can then decide when to donate from the fund to charities - and you can do it anonymously.  The charity just knows money arrived from Fidelity or Schwab.  And if a charity can't accept donated shares directly, you can use this donor advised fund to give them cash, instead.