Vanguard used FIFO cost basis when I specified SpecID

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2sls
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Vanguard used FIFO cost basis when I specified SpecID

Post by 2sls »

I attempted to make a tax loss harvesting sale last December with specific identification on a particular lot that had a high cost basis.

To my surprise my 1099 ended up using FIFO with a much lower cost basis (an earlier acquisition as the prices have been rising).

This resulted in a 5 figure swing from a loss to a gain. So I contacted Vanguard and they said that their records show I did not use specific identification and that was that.

I don't have any proof other than the fact that I specifically clicked on the lot that I wanted to sell when I was making the transaction (even making sure that I was selling the exact size of that particular lot). (Because I don't have any hard proof I will admit that there is some small chance I imagined the whole thing.)

Nevertheless, I am a bit upset as I think I did the right thing. Do I have any recourse here to dispute this in order to get the cost basis changed? I searched the forums and found other instances where Vanguard messed up the cost basis but not this particular issue.
Thesaints
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by Thesaints »

You can however file taxes using SpecID. There is an entry on schedule D where you state that broker reported numbers are being amended.
The only drawback I see is that from now on you’ve gotta keep an accurate record yourself.
drzzzzz
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by drzzzzz »

I have had other issues with Vanguard about reinvesting dividends when I said they should go to the settlement account because I was also tax loss harvesting and wanted to avoid wash sales. I now do screenshots of my transactions with Vanguard so I have a record of it. I would also change your account global settings to specific ID as well as making sure the individual mutual funds are listed that way if you havent already. I also have noted that when I open a new fund or a new one is created by Vanguard as a cash account since the new deposit might not be marginable yet, that they often will set the account up as having no basis selected or default to average cost, so I watch the cost basis screens more carefully now. Good luck
clip651
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by clip651 »

You could try asking them for the records of your transaction - perhaps their IT department can reconstruct your clicks on that day? It may be worth asking since the transaction was large and it may be a pain to keep your own records for cost basis in the future.

When I tax lost harvest, or make other transactions where details are critical, I take screenshots as I go. That way I have a record of which lots I selected, as well as the fact that it was SpecID. That may help you in future transactions.

cj
clip651
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by clip651 »

Also, for something like this, consider contacting Vanguard in writing (by secure message) and taking a screenshot of your message. Then when they reply you will have it in writing.
CFM300
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by CFM300 »

Since you were trying to sell a specific lot, the number of shares that Vanguard FIFO'd should be exactly the same as the size of the lot you were trying to specifically, correct? That would be some bit of evidence that they and not you made a mistake.
Thesaints
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by Thesaints »

CFM300 wrote: Fri Mar 08, 2019 11:00 am Since you were trying to sell a specific lot, the number of shares that Vanguard FIFO'd should be exactly the same as the size of the lot you were trying to specifically, correct? That would be some bit of evidence that they and not you made a mistake.
One can apply SpecID to part of a lot as well, but yours is certainly an idea worth trying.
johan851
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by johan851 »

Based on issues I've had and those I've seen reported by others, Vanguard is somehow terrible at cost basis in general. Unfortunately I think you'll need to keep a record for yourself either way.
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2sls
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by 2sls »

A couple of answers to the questions:

1. I original used secure message to get them to investigate the issue. The representative said he contacted the department that handles this who verified that I did not click on specific identification in their logs and so the system defaulted to FIFO.

2. I will always use screenshots from now on.

3. My main question is whether I can still file using my chosen cost basis instead of Vanguard's reported cost basis and the consequences for that? I don't mind keep tracking of the lots myself but I worry if it will trigger some other problem.
megabad
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by megabad »

2sls wrote: Fri Mar 08, 2019 11:42 am 3. My main question is whether I can still file using my chosen cost basis instead of Vanguard's reported cost basis and the consequences for that? I don't mind keep tracking of the lots myself but I worry if it will trigger some other problem.
I would probably not do this even if you could. As posted above, this will create an obvious discrepancy at the IRS this year and a reporting nightmare indefinitely.

Side note: if you have older holdings, your cost basis options at Vanguard will be limited. If you use average ever, your options may also be limited. Also, I think I have to change the cost basis option on new investments regardless of the old/global setting.
Pam01
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by Pam01 »

This happened to me earlier last year. My funds have been set up for specific identification, but the trade confirmation I received from Vanguard showed FIFO as the cost basis. Fortunately, I had a screen shot of the sale with confirmation number (the page you get when you click submit on the sale) that clearly showed the specific identification choice and the lots I had chosen to sell. I just secure emailed Vanguard and included the screen shot as the attachment. They corrected the cost basis of the sale. The 1099-B I received from Vanguard for last year showed the correct cost basis using specific identification.
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by Artsdoctor »

clip651 wrote: Fri Mar 08, 2019 10:45 am You could try asking them for the records of your transaction - perhaps their IT department can reconstruct your clicks on that day? It may be worth asking since the transaction was large and it may be a pain to keep your own records for cost basis in the future.

When I tax lost harvest, or make other transactions where details are critical, I take screenshots as I go. That way I have a record of which lots I selected, as well as the fact that it was SpecID. That may help you in future transactions.

cj
Whenever you place an order, and definitely when you're using Specific ID as your cost basis method, you're prompted to pick your lots and those lots are itemized on your final order. There is an upper right screen icon that allows you to print the order (which specifies those lots). I print it in PDF format and attach it to my sale transaction in Quicken but you can easily print it for your own records and file it somewhere.

Whenever you have a transaction that is a taxable event, you can never go wrong printing documentation of that order.
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GerryL
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by GerryL »

I had repeated problems with Vanguard using FIFO when I had clearly chosen SpecID for the sale of individual stock holdings. (Always save a screen shot of order!) I always check as soon as the sale goes through to make sure they followed instructions. Several sales were entirely mucked up, but staying on them until it was recorded accurately did the trick. I seem to recall that the problems were most likely to occur when I was transacting older "non-covered" shares.
Anyway, they seem to have gotten their act together and I was given a clue about how to confirm the correct shares were documented as sold: Wait 3-4 days before checking the transaction on the VG website. Apparently, their system automatically executes the sale as a FIFO and then humans need to go in to change as needed.
As I said, this may be more of a problem with non-covered shares. This week I did a sale of shares in a covered lot and the confirmation was correct from the get go. No need to call anyone.
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Artsdoctor
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by Artsdoctor »

If you're selling non-covered shares, you're on your own. All non-covered shares are "average cost method" at Vanguard although when you make your sale, you're going to click on "non-covered shares." You're supposed to notify Vanguard in writing of the specific lots if you're selling non-covered shares, and you'll be recording those sales on your tax return as non-covered shares as well (you don't lump non-covered shares with covered shares on your return).
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by Dottie57 »

Just when I think of starting a Vanguard account issues show up.
JustinR
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by JustinR »

2sls wrote: Fri Mar 08, 2019 11:42 am A couple of answers to the questions:

1. I original used secure message to get them to investigate the issue. The representative said he contacted the department that handles this who verified that I did not click on specific identification in their logs and so the system defaulted to FIFO.

2. I will always use screenshots from now on.

3. My main question is whether I can still file using my chosen cost basis instead of Vanguard's reported cost basis and the consequences for that? I don't mind keep tracking of the lots myself but I worry if it will trigger some other problem.
Did you consider doing what this person suggested? Seems like that would fix your issue.
CFM300 wrote: Fri Mar 08, 2019 11:00 am Since you were trying to sell a specific lot, the number of shares that Vanguard FIFO'd should be exactly the same as the size of the lot you were trying to specifically, correct? That would be some bit of evidence that they and not you made a mistake.
cherijoh
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by cherijoh »

megabad wrote: Fri Mar 08, 2019 12:33 pm
2sls wrote: Fri Mar 08, 2019 11:42 am 3. My main question is whether I can still file using my chosen cost basis instead of Vanguard's reported cost basis and the consequences for that? I don't mind keep tracking of the lots myself but I worry if it will trigger some other problem.
I would probably not do this even if you could. As posted above, this will create an obvious discrepancy at the IRS this year and a reporting nightmare indefinitely.

Side note: if you have older holdings, your cost basis options at Vanguard will be limited. If you use average ever, your options may also be limited.
I have shares purchased prior to the change in rules (2010?), so they are non-covered shares. VG shows them in my account summary as one lump lot with an average cost basis, even though I purchased them through VG and the transaction view shows them as individual lots. I have been selling them via Specific ID and maintaining my own records. (No shares were ever sold by any other method). The 1099 shows up with a box checked indicating that it is a sale of non-covered shares. So I just fill out a form 8949 to correct the cost basis. I haven't been challenged by an audit yet.

But if these were covered shares (which is how I read the original post) I would be very hesitant to try and claim that Spec ID was used since VG disputes this.
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by Thesaints »

cherijoh wrote: Fri Mar 08, 2019 1:51 pm I have shares purchased prior to the change in rules (2010?), so they are non-covered shares. VG shows them in my account summary as one lump lot with an average cost basis, even though I purchased them through VG and the transaction view shows them as individual lots. I have been selling them via Specific ID and maintaining my own records. (No shares were ever sold by any other method). The 1099 shows up with a box checked indicating that it is a sale of non-covered shares. So I just fill out a form 8949 to correct the cost basis. I haven't been challenged by an audit yet.

But if these were covered shares (which is how I read the original post) I would be very hesitant to try and claim that Spec ID was used since VG disputes this.
That's precisely what Form 8949, namely columns (f) and (g), is for.
Last edited by Thesaints on Fri Mar 08, 2019 2:52 pm, edited 1 time in total.
UpperNwGuy
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by UpperNwGuy »

GerryL wrote: Fri Mar 08, 2019 12:55 pm I was given a clue about how to confirm the correct shares were documented as sold: Wait 3-4 days before checking the transaction on the VG website. Apparently, their system automatically executes the sale as a FIFO and then humans need to go in to change as needed.
What? Humans need to go in and make changes each time? Are you sure?
Thesaints
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by Thesaints »

UpperNwGuy wrote: Fri Mar 08, 2019 2:45 pm What? Humans need to go in and make changes each time? Are you sure?
VG seems to be offering the best customer service low expenses and fees can buy.
spitty
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by spitty »

Happened to me in December using TDA. I sold some shares LIFO to show a ST loss but 1099 arrived in Feb showing a large gain on this sale meaning they'd recorded it as FIFO. Called a rep who put me on hold 5 min then came back an said I'd be issued a new 1099 in a couple weeks. Unsure if they looked back at the actual transaction, but they probably did. He also said that this can happen with any stock getting dividends reinvested -- somehow the system gets "confused" and defaults to "your standing method" which has always been FIFO for me. Said it's best to call after doing this next time to reinforce the directive. I'll also take screen shots from now on! So I would think Vanguard can look back on your transaction to see exactly what you did.
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midareff
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by midareff »

It is/was my understanding they do that with automatic periodic withdrawals. If you are scheduling a withdrawal you should be able to select specific shares.
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2sls
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by 2sls »

Further clarification

1. Yes these were covered shares

2. I will try again with Vanguard to see if they are willing to change the cost basis - but basically the secured message is claiming that their system did not show that I picked a particular lot to sell.
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GerryL
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by GerryL »

UpperNwGuy wrote: Fri Mar 08, 2019 2:45 pm
GerryL wrote: Fri Mar 08, 2019 12:55 pm I was given a clue about how to confirm the correct shares were documented as sold: Wait 3-4 days before checking the transaction on the VG website. Apparently, their system automatically executes the sale as a FIFO and then humans need to go in to change as needed.
What? Humans need to go in and make changes each time? Are you sure?
Whether it is true, I don't know. That is what I understood from my rep. Sounds like the transactions are automated and there is follow up by people. Quality control step? Maybe only required for SpecID from a consolidated lot of noncovered shares. Or maybe only on my account because I made such a stink when they kept getting it wrong. :D
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Artsdoctor
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by Artsdoctor »

2sls wrote: Fri Mar 08, 2019 3:21 pm Further clarification

1. Yes these were covered shares

2. I will try again with Vanguard to see if they are willing to change the cost basis - but basically the secured message is claiming that their system did not show that I picked a particular lot to sell.
I'm trying to understand documentation here.

You sold shares but there's no written documentation on your end. You think you did Specific ID but can't be sure. Vanguard does have documentation and you disagree with it. I've had disputes with a variety of financial institutions over the years but without documentation, I'm not sure what sort of recourse you have. When you make a sale in a taxable account, don't you keep a record of some sort?
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Artsdoctor
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by Artsdoctor »

GerryL wrote: Fri Mar 08, 2019 3:49 pm
UpperNwGuy wrote: Fri Mar 08, 2019 2:45 pm
GerryL wrote: Fri Mar 08, 2019 12:55 pm I was given a clue about how to confirm the correct shares were documented as sold: Wait 3-4 days before checking the transaction on the VG website. Apparently, their system automatically executes the sale as a FIFO and then humans need to go in to change as needed.
What? Humans need to go in and make changes each time? Are you sure?
Whether it is true, I don't know. That is what I understood from my rep. Sounds like the transactions are automated and there is follow up by people. Quality control step? Maybe only required for SpecID from a consolidated lot of noncovered shares. Or maybe only on my account because I made such a stink when they kept getting it wrong. :D
If you use specific lot ID for non-covered shares, you're supposed to notify them in writing. In turn, they acknowledge it back to you, so that's where the manual documentation comes into play. I don't think there's any manual maneuvers when selling covered shares.
sd55
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by sd55 »

The IRS requires you to have a written confirmation of shares sold from Vanguard if you want to use Specific Share Identification. I don't think you can just keep your own accounting. This is from IRS Publication 550:
If you adequately identify the shares you sold, you can use the adjusted basis of those particular shares to figure your gain or loss.
You will adequately identify your mutual fund shares, even if you bought the shares in different lots at various prices and times, if you: (1) Specify to your broker or other agent the particular shares to be sold or transferred at the time of the sale or transfer, and (2) Receive confirmation in writing from your broker or other agent within a reasonable time of your specification of the particular shares sold or transferred.
My experience with doing specific share ID at Vanguard was uniformly bad. It's hard to specify shares, hard to get an acknowledgement, and even then they mess up the accounting. And their customer service reps don't understand it. I finally gave up, converted to ETFs and moved the shares to Fidelity.
TravelGeek
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by TravelGeek »

Artsdoctor wrote: Fri Mar 08, 2019 4:47 pm You sold shares but there's no written documentation on your end. You think you did Specific ID but can't be sure. Vanguard does have documentation and you disagree with it. I've had disputes with a variety of financial institutions over the years but without documentation, I'm not sure what sort of recourse you have. When you make a sale in a taxable account, don't you keep a record of some sort?
I think it isn't unreasonable to assume that Vanguard is keeping the record... and correctly. Which doesn't seem to be the case based on many messages here in this thread and elsewhere. I suspect the OP will from now on "keep a record of some sort".

I recently spent a lot of time entering a couple of decades worth of transaction records into a spreadsheet so that I can track my lots and sales when I get to the point that I am selling funds. I'd have rather spend the time doing other stuff, but threads like this have been helpful in preparing me for failures in Vanguard's record keeping (and the whole non-covered thing) :)
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2sls
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by 2sls »

I acknowledge having no documentation (screenshot) showing my side - but this wasn't a problem I was expecting to have either. Furthermore, Vanguard didn't provide me any documentation either way (FIFO or SpecID) in my confirmation emails of the order and its execution. If they did I would have followed up then instead of now.

This is obviously a learning lesson for me and hopefully others will also be aware of this possibility.
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GerryL
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by GerryL »

FYI
About 2 years ago I provided Vanguard with the lot information (date and # of shares) for a big clump of shares that had been transferred to them with no detail. All noncovered, of course. It took a couple of weeks, but they put all the info into their database so now I can easily indicate which specific lots I want to trade. Of course, I take a screen shot of each order and check the transaction confirmation (and the website) after each transaction.
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celia
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by celia »

2sls wrote: Fri Mar 08, 2019 10:20 am I don't have any proof other than the fact that I specifically clicked on the lot that I wanted to sell when I was making the transaction (even making sure that I was selling the exact size of that particular lot). (Because I don't have any hard proof I will admit that there is some small chance I imagined the whole thing.)

Nevertheless, I am a bit upset as I think I did the right thing. Do I have any recourse here to dispute this in order to get the cost basis changed? I searched the forums and found other instances where Vanguard messed up the cost basis but not this particular issue.
You also have to set your settings for SpecID. This was processed by a computer and the computer could only do what it was "set up" to do. Were your settings already set at the time?

My Accounts > Account Maintenance > Cost Basis Method

If you choose to override what your 1099-B form says, you need to first enter what the form says, then there should be a question asking if all the data is correct. Select "no". Then you can enter your cost basis.

However, this will not match Vanguard's records. If you sell the remaining shares some day, they will use the basis of the more recent shares and then you may forget to override the basis again. How will you remember this?
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Artsdoctor
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by Artsdoctor »

2sls wrote: Fri Mar 08, 2019 5:25 pm I acknowledge having no documentation (screenshot) showing my side - but this wasn't a problem I was expecting to have either. Furthermore, Vanguard didn't provide me any documentation either way (FIFO or SpecID) in my confirmation emails of the order and its execution. If they did I would have followed up then instead of now.

This is obviously a learning lesson for me and hopefully others will also be aware of this possibility.
We've all had lessons learned.

I'm not an employee at Vanguard so I don't really have a vested interest in touting their advantages and downplaying their shortcomings. But when it comes to transactions in a taxable account, it's really the responsibility of the investor to keep records. I don't think it's reasonable to expect that mistakes will never happen and that a financial institution will not have glitches. Your documentation should be matched with the transaction on line around the time of execution, and then it should be filed away until you do your taxes in order to reconcile it with your 1099's.

So in reality, if you don't have documentation of your transaction, you can't really say with certainty that you specified SpecID.
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by Pam01 »

2sls wrote: Fri Mar 08, 2019 5:25 pm I acknowledge having no documentation (screenshot) showing my side - but this wasn't a problem I was expecting to have either. Furthermore, Vanguard didn't provide me any documentation either way (FIFO or SpecID) in my confirmation emails of the order and its execution. If they did I would have followed up then instead of now.

This is obviously a learning lesson for me and hopefully others will also be aware of this possibility.
Vanguard does provide a trade confirmation, which you can find in your statements/trade confirmation section online. That confirmation does show what cost basis method was used. In my case, it showed FIFO although I had specifically requested Specific Identification. Since I had printed the confirmation of the sale along with the confirmation number and it clearly showed I had requested specific identification, Vanguard was able to correct the error.

When you are dealing with taxable trades, it is always a good practice to double check the trade confirmations to ensure any errors can be caught on time.
Last edited by Pam01 on Fri Mar 08, 2019 8:06 pm, edited 1 time in total.
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Artsdoctor
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by Artsdoctor »

Pam01 wrote: Fri Mar 08, 2019 7:07 pm
2sls wrote: Fri Mar 08, 2019 5:25 pm I acknowledge having no documentation (screenshot) showing my side - but this wasn't a problem I was expecting to have either. Furthermore, Vanguard didn't provide me any documentation either way (FIFO or SpecID) in my confirmation emails of the order and its execution. If they did I would have followed up then instead of now.

This is obviously a learning lesson for me and hopefully others will also be aware of this possibility.
Vanguard does provide a trade confirmation, which you can find in your statements/trade confirmation section online. That confirmation does show what cost basis method was used. In my case, it showed FIFO although I had specifically requested Specific Identification. Since I had printed the confirmation of the sale along with the confirmation number and it cleared showed I had requested specific identification, Vanguard was able to correct the error.

When you are dealing with taxable trades, it is always a good practice to double check the trade confirmations to ensure any errors can be caught on time.
Exactly. And herein lies the message of the thread. It doesn't make a difference if you're dealing with Vanguard, Fidelity, Schwab, or any other brokerage firm. When you execute a trade in a taxable account, you need to keep documentation of what you've done. In personal finance, without documentation, you're really flying by the seat of your pants. It's really a mistake, sometimes a big mistake, to relinquish that responsibility to a brokerage firm of any sort.
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Pete12
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by Pete12 »

A similar thing happened to me a couple of years ago: viewtopic.php?t=213035

Fortunately it was easily fixed since I had a paper trail.

Lessons learned: 1. Take screenshots of all transactions and save all trade confirmations. 2. Scrutinize your account and tax statements! DO peek!
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by TravelGeek »

Artsdoctor wrote: Fri Mar 08, 2019 6:05 pm I'm not an employee at Vanguard so I don't really have a vested interest in touting their advantages and downplaying their shortcomings. But when it comes to transactions in a taxable account, it's really the responsibility of the investor to keep records. I don't think it's reasonable to expect that mistakes will never happen and that a financial institution will not have glitches.
As a software engineer having written financial software, I disagree. Our expectation should be for Vanguard or any broker to keep accurate records. What other record keeping mistakes would you consider acceptable? This is what we pay for. And I don’t think, technically, it is rocket science.

The IRS is certainly expecting us to be perfect and not make mistakes. :beer
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2sls
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by 2sls »

I went back to the trade confirmation page on Vanguard and it did state the cost basis was using FIFO so I did have an opportunity to catch this earlier - I always relied on the email confirmation in the past which doesn't say anything about the cost basis. In case it wasn't obvious, this was my first time doing tax lost harvesting.

Now that I see the FIFO cost basis, I am confused once again because it failed to completely deplete the earliest lots and allocated some cost to subsequent lots. So who knows what the heck they are doing - this error would be in my favor slightly since costs have been rising.

I just checked my cost basis methods which have remain unchanged since I made this sale and they are all SpecID. Short of fat finger clicks and not understanding what I was clicking on, I am pretty sure I did what I did. (There seems to be undue skepticism that I in fact clicked the order settings correctly in light of all the other evidence that Vanguard's systems are mistake prone)

Reflecting on this episode, I have never experienced a scenario where I thought I did X and the financial institution said I did Y, so I guess this was my own naivety. Not just based on my own experience, but that of others, my assessment of Vanguard's software control has gone down tremendously; I used to think they were saving money on the website so that they can put resources where it's needed (the backend), but I guess it's just all correlated.
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by stlutz »

2sls wrote: Sat Mar 09, 2019 9:22 am ... there seems to be undue skepticism that I in fact clicked the order settings correctly (setting aside the issue of taking the screenshot which I fully acknowledge).
I think I probably speak for the larger group when I say that is not much skepticism on the matter as what you have described has happened to a lot of people (including me). The problem was not having what you needed to prove to Vanguard that they were wrong.

And yes, I'm probably not the only one who keeps such screenshots when making a trade at Vanguard Brokerage but doesn't worry about it with Schwab or Fidelity.
kaneohe
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by kaneohe »

2sls wrote: Fri Mar 08, 2019 5:25 pm I acknowledge having no documentation (screenshot) showing my side - but this wasn't a problem I was expecting to have either. Furthermore, Vanguard didn't provide me any documentation either way (FIFO or SpecID) in my confirmation emails of the order and its execution. If they did I would have followed up then instead of now.

This is obviously a learning lesson for me and hopefully others will also be aware of this possibility.
This is a valuable lesson for all. I got mixed messages here about if you could do spec share ID w/ Schwab online. I don't do online so that didn't apply to me. Schwab supposedly had a procedure in place for telephone transactions. Unlike you (I must be older and less trusting :happy ) , I wanted to have a detailed confirmation so we could duke it out in December at time of sale rather than at tax time. I found out in my dealings w/ Schwab that the average rep is not well versed in this subject, but thanks to one persistent one who got me to the cost-basis group (who knew?) , everything went smoothly from then on.
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Artsdoctor
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by Artsdoctor »

TravelGeek wrote: Fri Mar 08, 2019 9:20 pm
Artsdoctor wrote: Fri Mar 08, 2019 6:05 pm I'm not an employee at Vanguard so I don't really have a vested interest in touting their advantages and downplaying their shortcomings. But when it comes to transactions in a taxable account, it's really the responsibility of the investor to keep records. I don't think it's reasonable to expect that mistakes will never happen and that a financial institution will not have glitches.
As a software engineer having written financial software, I disagree. Our expectation should be for Vanguard or any broker to keep accurate records. What other record keeping mistakes would you consider acceptable? This is what we pay for. And I don’t think, technically, it is rocket science.

The IRS is certainly expecting us to be perfect and not make mistakes. :beer
You can definitely expect the broker to have accurate records. But as a software engineer, you would certainly appreciate that mistakes can occasionally occur. I don't think that it's reasonable to have flawless bookkeeping for the entirety of one's life. The only way you're going to be able to correct a mistake is to provide documentation to support your case (and this would also apply to providing the IRS with documentation regarding any declaration on any form).

At the end of the day, it doesn't really matter whether or not you believe that a broker should or shouldn't be perfect each and every time you make a transaction. If there's a mistake made and you DON'T have any documentation to support your case, you're going to have a very hard time correcting the mistake you think has been made.
FactualFran
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by FactualFran »

2sls wrote: Sat Mar 09, 2019 9:22 am Now that I see the FIFO cost basis, I am confused once again because it failed to completely deplete the earliest lots and allocated some cost to subsequent lots. So who knows what the heck they are doing - this error would be in my favor slightly since costs have been rising.
With FIFO, earlier lots may not be in the sale because those lots are non-covered shares and when the sale was done an option of selling only covered shares was made either explicitly or by default.
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by RTR_early »

Just a warning: this is still happening. I executed several transactions this year trying to unwind out of my Target Date Funds after last December's fiasco. I have been selling lots with a loss as the market declines, however I just looked at my Realized Gains page and it showed Gains instead of Losses. Upon investigation I see that my transactions are marked as FiFo when in fact the default for the account is set to SpecID (and I know that I chose specific lots in the sale). I did not document what I did (another hard lesson learned in the last few months with Vanguard), but I have sent them a message asking to correct it.

One possibility that I am considering is that the specific lots I tried to sell had in fact already been sold in a previous transaction, so the system didn't know what to do so rolled back to FiFo (with no notification of such during the transaction).

Is this sort of financial transaction regulated by the SEC? If the brokerage presents incorrect information and/or executes a trade in a method that was not approved by the customer, is that breaking any SEC rules?
Bud
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by Bud »

A situation similar to yours is exactly what I have faced. In consultation with my CPA, he stated that I can use specific lot as long as I can justify that to the IRS. For me, this means a spreadsheet which tracks all purchases and sales, gains, or losses.

All the best.
RTR_early
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by RTR_early »

I'm almost certain I know what happened now.

I sold the same lot 4 times (or thought I was selling the same lot) because Vanguard did not remove the original lots from the list of sellable lots after I sold them the first time. So I kept selecting the same lots to sell over and over again but they did not actually exist, so the system chose some other lots and other cost basis method on its own. Vanguard's technology is pure crap.. inexcusable for one of the largest brokerages in the world.
RCL
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by RCL »

RTR_early wrote: Tue Mar 08, 2022 3:22 pm I'm almost certain I know what happened now.

I sold the same lot 4 times (or thought I was selling the same lot) because Vanguard did not remove the original lots from the list of sellable lots after I sold them the first time. So I kept selecting the same lots to sell over and over again but they did not actually exist, so the system chose some other lots and other cost basis method on its own. Vanguard's technology is pure crap.. inexcusable for one of the largest brokerages in the world.
How much time between when you first sold the first time and when you tried to sell the second time?
rkhusky
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by rkhusky »

RTR_early wrote: Tue Mar 08, 2022 12:11 pm Just a warning: this is still happening. I executed several transactions this year trying to unwind out of my Target Date Funds after last December's fiasco. I have been selling lots with a loss as the market declines, however I just looked at my Realized Gains page and it showed Gains instead of Losses. Upon investigation I see that my transactions are marked as FiFo when in fact the default for the account is set to SpecID (and I know that I chose specific lots in the sale). I did not document what I did (another hard lesson learned in the last few months with Vanguard), but I have sent them a message asking to correct it.

One possibility that I am considering is that the specific lots I tried to sell had in fact already been sold in a previous transaction, so the system didn't know what to do so rolled back to FiFo (with no notification of such during the transaction).

Is this sort of financial transaction regulated by the SEC? If the brokerage presents incorrect information and/or executes a trade in a method that was not approved by the customer, is that breaking any SEC rules?
If you make a sale under Average Cost, all shares up to that point are locked into Average Cost. If you change to Spec ID later, the cost basis of all the prior shares will be the same, but the subsequent shares will be listed with actual cost.
RTR_early
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by RTR_early »

RCL wrote: Tue Mar 08, 2022 7:27 pm
How much time between when you first sold the first time and when you tried to sell the second time?
It was about 3.5 weeks between sale 1 and sale 2, then about 1 week in between sales 2, 3, 4. All sales have the exact same amount of fractional shares.
RTR_early
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by RTR_early »

rkhusky wrote: Tue Mar 08, 2022 7:42 pm
If you make a sale under Average Cost, all shares up to that point are locked into Average Cost. If you change to Spec ID later, the cost basis of all the prior shares will be the same, but the subsequent shares will be listed with actual cost.
I never sold under Average Cost. And regardless, I selected specific lots to sell with specific gains (losses).
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Pete12
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by Pete12 »

After this happened to me a while back I have always followed the following protocol when selling shares at Vanguard using Spec ID:

1. As soon as the trade is submitted, print a copy of the confirmation showing the lots relieved.
2. The next day, go online to the realized gain/loss tab in the cost basis section and print a copy of that
3. When Vanguard sends the official PDF trade confirmation, save a copy of that.

This way I have a complete record of the transaction. I did some TLHing yesterday and have all my records together so I can relax 8-)
tomd37
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Re: Vanguard used FIFO cost basis when I specified SpecID

Post by tomd37 »

OP - Last year I had an issue with selling shares in a VG taxable account. At the time I did not know that it can take two to three days for a cost basis method online change to take effect. I incorrectly assumed that if I changed the cost basis method just prior to making the sale it would take effect immediately. Well, it doesn't and after several weeks of written and verbal communication with various VG representatives, I learned that you have to give the system several days to react to any cost basis method change one might make. I don't know if this might be part of your situation or not.
:confused
Tom D.
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