Verification Suite

Mar 2 is the first long-term day after a leap-day acquisition

A lot acquired on Feb 29 does not become long-term until Mar 2 of the following year.

One sale can span multiple tax lots

A sale larger than the first lot should fully consume that lot and partially consume the next lot in deterministic order.

Optimized sells LT gains before ST gains

When you're in the gains zone, optimized lot selection sells long-term gains first because LT rates beat ST rates.

Feb 29 acquisition stays short-term through Mar 1

A lot acquired on Feb 29, 2024 is still short-term on both Feb 28 and Mar 1, 2025. Mar 2 is the first long-term day.

All four lot-selection buckets in correct order

Optimized lot selection should consume short-term losses first, then long-term losses, then long-term gains, and finally short-term gains.

Biggest loss goes first within a bucket

Within the same tax bucket, optimized lot selection should choose the lot with the greatest tax benefit first.

FIFO preserves insertion order for same-day lots

When two lots share the same acquisition date, FIFO should sell the lot that was inserted first. This keeps same-day ordering deterministic instead of arbitrary.

LIFO reverses insertion order for same-day lots

When two lots share the same acquisition date, LIFO should sell the most recently inserted lot first. This preserves deterministic tie-breaking for same-day positions.

Stock splits preserve total basis

A same-security stock split should not create a taxable event. It increases share count and lowers per-share basis while preserving each lot's total basis.

Spin-offs allocate basis by relative value

A nontaxable stock spin-off should allocate each parent lot's basis between parent and child shares using their relative fair-market values on the distribution date.

Stock-for-stock merger preserves basis

A qualifying stock-for-stock merger with no cash boot should not recognize gain or loss. The successor stock keeps the source lot's aggregate basis and holding period.

Stock merger cash boot recognizes gain and adjusts successor basis

In an otherwise nontaxable stock-for-stock merger, cash boot can trigger recognized gain up to the cash received. The successor stock keeps carryover basis adjusted for recognized gain and cash received.

Holder call exercise adds premium to stock basis

When a purchased call is exercised, the premium paid is added to the strike price and becomes part of the acquired stock basis.

Holder call exercise starts stock holding period at exercise

Publication 550 says property acquired by exercising an option starts its holding period after exercise. A long-held call should not carry its option-open date into the acquired stock lot.

Writer put assignment reduces acquired stock basis

When a written put is assigned, the premium received reduces the basis of the stock acquired through assignment.

Writer put assignment starts stock holding period at assignment

Publication 550 says a writer whose put is exercised starts the acquired stock holding period on the date the stock is bought, not the date the put was written.

Covered call assignment adds premium to proceeds

When a written call is assigned, the option premium is added to the stock-sale amount realized for gain or loss.

Holder put exercise reduces sale proceeds

When a purchased put is exercised, the premium paid reduces the amount realized on the sale of the underlying shares.

Put exercise gain can be short-term under the short-sale rule

Publication 550 generally treats buying a put as a short sale. If the underlying stock was still short-term when the put was bought, gain on exercising the put should be short-term even when the stock sale occurs more than one year after the stock was acquired.

Put short-sale rule applies when stock is bought after the put

Publication 550 applies the same short-sale character rule when the taxpayer buys the underlying stock after buying the put but before exercise. Positive gain on exercising that put should be short-term even when the later stock sale is more than one year after the stock was acquired.

Purchased option expiration recognizes a capital loss

When a purchased listed option expires worthless, the premium paid becomes a capital loss and the term follows the option holding period.

Written option expiration recognizes short-term gain

When a non-dealer written listed option expires unexercised, the deferred premium is recognized as short-term capital gain.

Option closing transaction recognizes premium spread

A purchased option sold in a closing transaction recognizes gain equal to closing premium received minus the premium paid.

Written option closing purchase recognizes short-term loss

A non-dealer writer who closes a listed option by buying it back recognizes short-term capital gain or loss equal to the premium received minus the closing premium paid.

HIFO is blind to tax character

HIFO picks the highest cost basis lot regardless of whether it's LT or ST. This can be suboptimal compared to the optimized method.

FIFO and LIFO produce different gains

FIFO sells the oldest lot first (LT gain), LIFO sells the newest first (ST gain). Same lots, different tax outcomes.