Question

A customer has purchased 5,000 shares of ABC Corporation stock in lots of 100 shares over an extended period of time at varying prices. The customer now sells 500 of the shares. Which statement is TRUE?

a. IRS rules require that First In First Out accounting to be used to identify the shares sold when computing any gain or loss
b. IRS rules require that LIFO accounting be used to identify the shares sold when computing any gain or loss
c. IRS rules allow the taxpayer to specify which shares being sold
d. IRS rules require that the method giving the largest capital gain be used

Answer 1

c. IRS rules allow the taxpayer to specify which shares being sold

Step-by-step explanation:

As eahc method will make the capital gain or loss to differ the Internal Revenue Service leaves to the stockholder to decide the method

The default method is the FIFO method which states the first shares purchased are the first sale but, leaves choise to the stockhodler to use specific identification which, is what the statement correctly points out.

The method are not "required" but allowed as the stockholder see fit.