Help Center

Each time you purchase a security for a client, it creates a new tax lot. The tax lot contains the number of shares purchased, the cost basis and the purchase date. When you sell the security, the lot is closed and the sales proceeds are associated with the lot. If you only sell some of the shares in a single tax lot, the lot will be divided into two, separating the remaining shares from those that were sold.

Every time you buy shares, an Open Tax Lot is created to track the date and the price of the purchased security. When you sell the shares, tax lots allow us to automatically find the shares that help keep your taxes as low as possible.

With Open Tax Lots, you can track the following information for each security you currently own:

• Purchase date
• Number of shares
• Total purchase cost
• Total current value
• Current gain or loss since purchase
• Short or long-term status

Open Tax Lots will also be useful in the following ways:

• If you want to create capital losses, you can view Open Tax Lots to find stocks that can currently be sold at a loss.
• If you bought the same security on different occasions, you will be able to view each purchase separately—taxable accounts only.
• If you bought the same security on different occasions, you will be able to view purchase dates to help prevent wash sales—taxable accounts only.
• If you transferred shares to us, you can go to your Open Tax Lots page to provide the purchase cost and purchase date for the shares. Once you're on the page, simply find the transferred shares and select Edit Tax Lot.

If you have any specific questions about tax planning when you invest, please seek the advice of a tax advisor or financial consultant.

Every time you sell shares, a Closed Tax Lot is created to track the date and price of your sale.

With Closed Tax Lots, you can track the following information for each security you currently own:

• Purchase date
• Sale date
• Number of shares
• Total purchase cost
• Total sale amount
• Gain or loss amount
• Short or long-term status of the sale

Closed tax lots will also be useful in the following ways:

• If you sold shares of the same security on different occasions, you will be able to view each sale separately—taxable accounts only.
• If you want to buy back a security you sold at a loss, viewing the sale date will help prevent wash sales—taxable accounts only.

The cost basis and gain/loss information is based on trade data or information that you enter. Total realized and unrealized gains/losses do not include securities for which cost basis is unavailable. The tax tools allow you to change the cost basis of all unrealized gains and losses, however, we take no responsibility for the information you provide.

Remember the accuracy of the calculations provided depend on the accuracy of the information you have entered. For securities purchased through this account, the calculations are based on actual trade data. While an attempt is made to provide precise data, the accuracy of all trade information is not guaranteed.

This information is for general guidance. We are not authorized to give tax advice. Because of the complexity of tax regulations and the individual circumstances of our customers, this information may not be complete or accurate for tax-reporting purposes. For example, we can’t identify losses that may be disallowed because of wash sale rules.

To edit your client’s tax lot:

1. Go to the client’s accounts page
2. In the Actions menu located next to the account, select Tax Information
3. Choose the time period and either Realized or Unrealized gain and loss information, then select View Gains & Losses.
4. Under a noncovered tax lot, select Edit Tax Lot.
5. Input the Purchase Date, Number of Shares and Total Purchase Cost, and then select the Update Tax Lots button to complete updating the tax lot.

Any noncovered tax lot can be edited, with the exception of pending tax lots. You can also edit costs for securities purchased in your non-taxable and tax-deferred accounts.

If you have more than 24 entries to make for a single security position, you can still enter this information by following these steps:

1. Make your first 23 entries; enter the balance of shares not yet entered as the 24th entry and select Update Tax Lots.
2. The counter will then reset, find the 24th entry you created with the remaining tax lots from step 1, and on the Open Tax Lots page, select Edit Tax Lot. You can then break out the 24th entry by tax lots. If you have more than 24 extra entries, repeat steps 1 and 2.

In accordance with IRS regulations, taxable gains and losses are calculated and maintained only at the Account level, not the Folio level. As a result, this requirement actually allows the tax lots that are best suited to your client’s tax lot inventory relief method to be sold when placing a sell trade in the account. Although the shares will be sold from the Folio in which the trade is placed, the tax lots will be selected from wherever they are most consistent with your client’s tax lot inventory relief selection.

Short and long-term gain and loss tax lots can be viewed on your client’s Account Holdings page. To determine which Folio holds a position, in the Shares column select the number.

The Account Holdings page shows capital gains and losses reflecting actual tax lots and the inventory relief method used for the account.

Only Account level tax lots are used for tax purposes.

As required by these regulations, we only adjust tax lots as a result of wash sales that occur with an identical security (same CUSIP) in the same account (even though the wash sale rule applies across multiple accounts). Although your clients are not allowed to claim the loss that results from a wash sale for tax purposes, the disallowed amount is added to the cost of the repurchased security. The disallowed loss amount is also reported to the IRS.

The wash sale rule only applies to losses. Gains must be reported even if the same or similar shares are purchased within thirty (30) days of the sale.

The ability to apply tax management strategies on an account-wide basis will allow you to more efficiently manage portfolios. When securities are sold, the system maximizes the tax benefit by scanning across all of your client’s Folios in an account for the desired tax lot. While the most beneficial tax lot will be used at the account level, security sales continue to occur from the intended Folio.

For example, assume the following transactions take place within an account:

1. Buy 100 shares of security XYZ in Folio 1 on April 1st for $10/share (total cost $1000).
2. Buy 100 shares of security XYZ in Folio 2 on July 1st for $6/share (total cost $600).
3. Sell 100 shares of Security XYZ from Folio 2 on September 1st for $9/share (total proceeds $900).

In the past, the sale of shares from Folio 2 would have resulted in the sale of the tax lot purchased in the same Folio on July 1st. Selecting this particular tax lot would result in a short-term capital gain of $300.

With Account level tax lot management, the system will look for tax lots across the entire account. With these changes, the tax lot purchased on April 1st is eligible to be selected. Choosing this lot will result in a short-term loss of $100. The actual lot selected will continue to depend on the inventory relief method selected for the account.

To view your client’s short-term and long-term gains or losses:

1. Go to the client’s account page
2. In the Actions menu located next to the account, select View Holdings
3. In the Holdings table select the Show Tax View button

To download both realized and unrealized gains and losses, go to your client’s Tax Center.

A tax lot selection method allows you to choose the order in which your client’s tax lots are relieved and could affect how much your client pays in Capital Gains taxes. Tax lot selection is also known as Inventory Relief method.

Each time you buy shares of a security, your client accumulates a tax lot. (If you buy 10 shares of Security XYZ once per day over a 5 day period, your client will have 5 tax lots.) Tax lots purchased over 1 year ago are considered long-term and transaction proceeds from the sale of long-term lots are generally taxed at a lower rate than the proceeds from the sale of lots purchased less than 1 year ago, which are considered short-term proceeds. If you are investing consistently, over time your client will accumulate many tax lots, and inevitably some will gain value and some will lose value (unrealized gains and losses).

When you decide to sell shares of a security, tax lots will be automatically selected based on the tax lot selection method you have chosen for your client’s account. The sold tax lots are now called realized gains or losses. After deducting losses, any remaining gains will be taxed at either your client’s Short-Term Capital Gains Tax Rate or his Long-Term Capital Gains Tax Rate.

For example, if you purchased 10 shares of Security XYZ once a month over a 2 year period, your client will have 24 unrealized tax lots, 12 short-term and 12 long-term, and a combination of gains and losses. If you choose to sell 10 shares, one of those 24 tax lots will be automatically selected to be realized.

We offer 10 methods which use different criteria to determine which of those tax lots will be sold. Some use time as the only parameter. For instance, if First In – First Out is the tax lot selection method you chose for your client, then the oldest tax lot will be realized, regardless of whether it is a gain or loss. Others use value to determine the order. Maximize Losses/Minimize Gains would sell your client’s largest loss first, regardless of whether it is a long or short-term loss. We also offer options that create more complex selection criteria that take both time and value into consideration. Additionally, we offer two tax rate weighted options which personalize the selection to take into account the Capital Gains tax rates you enter for your client.

Automated Tax Strategies

• Strategies to Minimize Capital Gains
  • Maximize Losses/Minimize Gains, Tax Weighted: Sell shares in the order of largest effective tax loss to largest gain, adjusted based on your client’s capital gains tax rates.
  • Maximize Losses/Minimize Gains: Sell shares with the largest losses first, largest gains last, regardless of long or short-term tax status.
• Strategies to Maximize Capital Gains
  • Maximize Gains/Minimize Losses, Tax Weighted: Sell shares in the order of largest effective tax gain to largest loss, adjusted based on your client’s capital gains tax rates.
  • Maximize Gains/Minimize Losses: Sell shares with the largest gains first, largest losses last, regardless of long or short-term tax status.
• Other Strategies to Manage Capital Gains and Losses
  • First In – First Out: Sell shares in the order that they were purchased from oldest to most recent.
  • Last In – First Out: Sell shares in reverse order of purchase from most recent to oldest.
  • Maximize Short-term Losses: Sell shares with short-term losses (large to small), then long-term losses (large to small), then long-term gains (small to large), then short-term gains (small to large).
  • Maximize Long-term Losses: Sell shares with long-term losses (large to small), then short-term losses (large to small), then short-term gains (small to large), then long-term gains (small to large).
  • Maximize Long-term Gain: Sell shares with long-term gains (large to small), then short-term gains (large to small), then short-term losses (small to large), then long-term losses (small to large).
  • Maximize Short-term Gain: Sell shares with short-term gains (large to small), then long-term gains (large to small), then long-term losses (small to large), then short-term losses (small to large).

Weighted inventory relief methods use your client’s long and short-term tax rates to determine which tax lots will be sold first.

• To reduce the amount owed in Capital Gains taxes choose Maximize Losses/Minimize Gains, Tax Weighted.
• To increase the amount owed in Capital Gains taxes choose Maximize Gains/Minimize Losses, Tax Weighted.

See below for an example illustrating how we determine the order tax lots are relieved.

• Maximize Losses / Minimize Gains: Sell shares with the largest losses first, largest gains last, regardless of long or short-term tax status.
• Maximize Losses / Minimize Gains, Tax Weighted: Adjust short-term gains/losses based on your client’s capital gains tax rates. Sell shares in the order of largest loss to largest gain.

Here are four tax lots of security XYZ. We will refer to the tax lots as Tax Lot A–D. Each tax lot is labeled with the number of shares, its gain or loss per share, and its status (whether it is a long-term or short-term tax lot).

Long-term tax lots were purchased more than one year ago. Short-term tax lots were purchased within the past year.

Maximize Losses / Minimize Gains

Using the Maximize Losses / Minimize Gains method, the shares are sold, or relieved, from largest loss to largest gain.

If the account holder sells 100 shares, he will sell Tax Lot A.*

• 100 Shares of Tax Lot A multiplied by $10 per share equals a $1000 Long-Term loss.
• The $1000 loss can be used to offset other sales that had a Long-Term Capital Gain.
• The potential tax savings from realizing this loss is computed below, assuming a Long-Term rate of 15%
  • $1000 × 15% = $150

Maximize Losses/Minimize Gains, Tax Weighted

The Maximize Losses/Minimize Gains, Tax Weighted method also sells shares from largest loss to largest gain, but first, it will adjust the tax lots based on your client’s Capital Gains Tax Rates. In order to select this method, the long-term and short-term tax rates for the account holder must be provided. We will determine the factor by which we will weigh the tax lots.

The Tax Weighted method is using the factor to give more weight to the short-term tax lots because they are taxed at a higher rate. The table below shows an equation for each tax lot, where the gain or loss is multiplied by the factor, resulting in a weighted gain or loss.

Note: The Gain/Loss Weighted column, created by the factor, is a mechanism used to determine the order in which tax lots are sold. The value of the tax lot does not change.

Using the number in the Gain/Loss Weighted column we have a relief order that differs from the Maximize Losses/Minimize Gains method.

If the account holder using this method were to sell 100 shares, he would sell Tax Lot B.*

• 100 Shares of Tax Lot B multiplied by $7 per share equals a $700 Short-Term loss.
• The $700 loss can be used to offset other sales that had a Short-Term Capital Gain.
• The potential tax savings from realizing this loss is computed below, assuming a Short-Term rate of 33%
  • $700 × 33% = $230
• In this example, the tax savings is $80 larger than the savings realized using the Maximize Losses / Minimize Gains method because the tax rate differential makes a smaller Short-Term loss more valuable than the larger Long-Term loss.
• The same logic makes the weighted method beneficial when selling lots with a Capital Gain. Because of the tax rate differential, Short-Term gains are increased by the weighting factor when determining the order that the tax lots are relieved.

*This example has been simplified to illustrate differences between two inventory relief methods. In this example, we have assumed a long-term tax rate of 15% and a short-term tax rate of 33% based on an income of $250,000 or less.

To change your client’s tax lot selection:

1. Go to the client’s accounts page
2. Under More Info select View Client Settings
3. Scroll down to the Information about Client Accounts
4. Under the Account Name select Tax Lot Selection
5. Decide which tax lot relief method you want for your client, then select Continue
6. Select Yes to confirm this change

To import your client’s tax lots to TurboTax or other popular tax software:

1. Go to the client’s accounts page
2. Under More Info select View Statements & Tax Records
3. Select the Tax Center Tab
4. Under the account name in the Form 8949 & Closed Tax Lot Downloads section, select Tax Software

Please see the IRS instructions for your client’s tax return type to determine where to include the capital gains (typically these are included as part of the IRS Schedule-D). The total short and long-term gains can be found on your client’s 1099-B and in the printout that you produced. Attach all pages to your client’s tax return as required by the IRS. Instructions for importing files into TurboTax are located on the TurboTax website. That page was created and is hosted by TurboTax. We make no representations as to the accuracy of the information found there. If you or your Client has further questions on importing a file into the TurboTax software, please contact TurboTax Support.

File uploads are not possible in the online version of TurboTax. To upload Folio Institutional tax files, you must use the downloadable or desktop versions of TurboTax. This is a limitation imposed by TurboTax—not by us. TurboTax does not support more than 3,000 tax lots to be imported into their software. If you have more than 3,000 tax lots in your downloaded file, you should use our printed list and attach it to your filing.

If you transferred shares to us, you should provide their tax lots—the date you purchased the shares and the total purchase price (including commissions) that you paid for the shares. This information is needed to determine your taxes.

“N/A” will appear in the Estimated Gain/Loss column if you have not provided tax lots.

When you sell the shares, tax lots allow us to automatically find the shares that fit the tax lot selection method you’ve chosen to keep your taxes as low as possible.

You will not be able to enter this information after you sell the shares.

Follow these steps to provide this information.

1. Select the Settings link.
2. On the Settings page, select View Tax Information from the drop-down box next to the name of the account that holds the shares.
3. On the Tax Information page, select the button next to View open tax lots, then select View Tax Information.
4. Find the transferred shares and select Enter Tax Lot.

Review trade confirmations and statements from your former brokerage to determine the purchase date and total purchase price. If you have not kept these records, you may be able to obtain the information by contacting the brokerage.

If you have provided this information, but feel you entered it incorrectly, follow these steps to edit the information.

1. Select the Settings link.
2. On the Settings page, select View Tax Information from the drop-down box next to the name of the account that holds the shares.
3. On the Tax Information page, select the button next to View open tax lots, then select View Tax Information.
4. Find the transferred shares and select Edit Tax Lot.

The tool will initially render a chart, using all open, short term tax lots with both gains and losses. Tax lots for symbols held in Non-Folio Holdings are not included. Select the term and gains/losses to narrow tax lots only to those that satisfy your filter criteria. Specify inclusions/exclusions at the symbol or tax lot level to filter tax lots even further. The values shown in Tax Lot Info will change to reflect your filter criteria.

Enter the amount of cash you wish to generate and/or desired taxable gain or loss. Or enter either one of these values and then use the sliders to specify the remaining value. The point in the graph will move to correspond with the values displayed in the Cash Proceeds and Gain/Loss fields.

Based on your specifications, you may have the option to select one or all of the following Order Options.

Reinvest

Generate orders using FDIC.CASH in order to keep the proceeds of this sale within each folio.

Apply Security Exclusions

Help manage wash sales by adding the selected securities to the account exclusion list for future transactions. You must remember to remove these exclusions after 30 days.

Override Security Exclusions

Ignore previously excluded securities when placing this order.

Tax lot details will be divided between short-term sells and long-term sells.

Each security will be listed in a separate row. The rows will contain the following information in order from left to right:

Symbol: The trading symbol for the company your client owns security in.

Security: The name of the company your client owns security in.

Purchase Date: The date the security was purchased.

Shares to Sell: The estimated number of shares you are selling based on last transaction prices that are at least 20 minutes old. Keep in mind that the last transaction may have occurred more than 20 minutes ago. The number of shares we actually sell may fluctuate depending on price movements between now and the time the order is executed.

Total Cost of Shares: The price paid for the shares multiplied by the “Shares to Sell.” If you purchased the shares on more than one occasion, we will combine the total cost for all purchases.

Total Current Value of Shares: The “Shares to Sell” multiplied by last transaction prices that are at least 20 minutes old. Keep in mind that the last transaction may have occurred more than 20 minutes ago. The number of shares we actually sell may fluctuate depending on price movements between now and the time the window closes.

Estimated Gain / Loss: If the “Current Total Value of Shares” is greater than the “Total Cost of Shares” when the order is executed, the sale will result in a gain.

If the “Current Total Value of Shares” is less than the “Total Cost of Shares” when the order is executed, the sale will result in a loss. If a loss is expected, the “Estimated Gain/Loss” amount will be in parentheses.

If the shares you are selling were transferred to us from another brokerage, and you have not provided their purchase date and cost, “N/A” will appear. Select “provide the missing information” on the right side of the page to learn how you can provide the missing information.

The “Estimated Gain/Loss” is based on last transaction prices that are at least 20 minutes old. The actual gain/loss may differ once the order is executed. Keep in mind that the last transaction may have occurred more than 20 minutes ago.

Totals: The shares to sell, total cost of shares, total current value of shares, and estimated capital gains / losses are totaled at the bottom of the page.

You may dramatically reduce your clients’ taxes and boost their returns if you keep track of the date and price that you purchase each share, and you sell the exact shares that save the most in taxes. That’s a big if for investors who don't have the time or the patience to keep and analyze detailed trading records on their own.

FOLIOfn has an easy solution. We keep track of tax information for you by creating a “tax lot” record each time you buy a security and reinvest cash distributions (dividends, capital gains, and return of capital) for clients.

When you sell shares, your clients’ tax bill depends on the profit or loss and how long they have owned the shares. If they owned the shares for less than a year, their profits will be taxed at the short-term rate, the personal income tax rate. If the shares were held for more than a year, the long-term capital gains rate of 20% applies.

At most brokerage firms and mutual funds, selecting the specific shares you are selling is so difficult that you give up on managing taxes. This costs your client money because what really counts is the after-tax return on investments. Choosing the best securities to sell from a tax perspective can increase clients’ returns dramatically.

This example shows how FOLIOfn’s system to track tax lots help reduce clients’ tax bill by 50%:

Example  Assume you purchased shares of the same security on 2 different occasions creating 2 tax lots.

• On February 1, you purchase $2,000 for $20 per share (100 shares).
• On August 1, you purchase $2,500 for $25 per share (100 shares).

Total holdings are 200 shares. Two years later, you want to sell $1,500 of the security. The market price is $30 per share, so you decide to sell 50 shares.

If you sell from the February 1 tax lot the capital gains on each share will be $10 or $500 for 50 shares. If the shares come from the August 1 tax lot the capital gains on each share will be only $5 or a total of $250.

Most brokers require you to use the “First In - First Out” method, unless your client writes a letter stating which shares to sell. If your broker used “First In - First Out,” your client would owe the higher amount, $100, in taxes.

On the other hand, your client’s FOLIOfn account is set to “Minimize Gain or Maximize Loss” whenever you sell, unless you change it to another of our eight tax lot selection methods. Our system automatically sells from the August 1st tax lot. With the click of a button, your client’s taxes have decreased from $100 to $50.

If you sell a security held for one year or less, the profits are taxed at the “short-term” rate, the personal income tax rate. The current Federal personal income tax rates are 15%, 28%, 31%, 36%, and 39.6%.

If you sell a security held more than one year, profits are taxed at the “long-term” capital gains rate, which is 20% in most cases. If your income tax rate is 15%, then your long-term rate will be 10%.

If you sell security at a capital loss, and in any given year the losses are greater than gains, clients can deduct the losses from their income for tax purposes. A maximum of $3,000 can be deducted each year. Any losses beyond $3,000 can be carried forward and deducted from future yearly income figures.

The holding period begins the day after you buy a security. One year from the beginning of the holding period, long-term capital gains rates go into effect. For example, if you bought 100 shares of security on June 1, 2000, the holding period begins on June 2, 2000. Long-term rates go into effect on June 2, 2001.

1. First In - First Out sells the shares you bought first.
2. Last In - First Out sells the shares you bought last.
3. Minimize Gain or Maximize Loss sells the shares in the order of largest loss to largest gain.
4. Maximize Gain or Minimize Loss sells the shares in the order of largest gain to largest loss.
5. Minimize Long-Term Gain sells the shares that you have held for more than one year first in the order of largest loss to largest gain. If you do not have enough long-term shares to meet your sell orders, shares you have held for one year or less will be sold in the order of largest loss to largest gain. This means that long term gains will be sold before short term gains or short term losses.
6. Minimize Short-Term Gain sells from the shares you have held for one year or less first in the order of largest loss to largest gain. If you do not have enough short-term shares, shares you have held for more than one year will be sold in order of largest loss to largest gain. This means that short term gains will be sold before long term gains or long term losses.
7. Maximize Long-Term Gain sells from the shares you have held for more than one year first in order of largest gain to largest loss. If you do not have enough long-term shares, some of the shares you have held for one year or less will be sold in order of largest gain to largest loss. This means that long term losses will be sold before short term gains or short term losses.
8. Maximize Short-Term Gain sells from the shares you have held one year or less first in order of largest gain to largest loss. If you do not have enough short-term shares, some of the shares you have held for more than one year will be sold in order of largest gain to largest loss. This means that short term losses will be sold before long term gains or long term losses.

We give you eight choices for controlling taxes that are explained above.

When you open an account for a client, we automatically select a choice that applies universally to all sell orders, “Minimize Gain or Maximize Loss.” You can change this setting when you open an account or by selecting the client’s “view” on the Client Accounts tab. The change you make will apply universally, every time you sell shares.

If you want to maintain a universal setting and change the setting for just one trade order, you can do so from the page where you place a trade. The setting will change for that one order but automatically revert back to your universal setting for all future sales.

At the end of the year, FOLIOfn will send your client a statement listing the dividends received and the short and long-term capital gains and losses for securities you sold. This list can be attached to clients’ Internal Revenue Service Schedule D or downloaded into popular tax calculation programs.

Tax lot records are not kept for non-taxable or tax deferred retirement accounts. Because clients pay no taxes when you sell securities in a retirement account, it is not necessary to record specific tax lots or choose a tax lot method. You will still be able to track the performance and capital gains of non-taxable accounts based on the average cost per share.

1. Select the Client Accounts tab. Then, select the name of a client.
2. Find the account or Folio that holds the securities you want to view.
3. Select View Tax Information from the drop-down box next to the account or Folio’s name and select Go.
4. On the Tax Information page, select the button next to View open tax lots, then select View Tax Information.

1. The Preview and Place Order page shows the estimated short and long-term capital gains for your order.
2. Select the Tax Lot Details button on the Preview and Place Order page to see short and long-term capital gains for each security.

1. Select the Client Accounts tab. Then, select the name of a client.
2. Find the Folio where the trade took place.
3. Select View Tax Information from the drop-down box next to the Folio’s name and select Go.
4. On the Tax Information page, select the button next to View closed tax lots, then select View Tax Information.

In general, your client will owe tax when you sell security and make a profit after subtracting brokerage fees.

Your client does not pay taxes on trading profits in a non-taxable retirement account. Retirement accounts are either “tax-deferred,” such as a regular Individual Retirement Account (IRA) or “non-taxable,” such as a Roth IRA account.

Every time you buy shares, an open tax lot is created to track the date and the price of purchase. Since these unrealized gains and losses are based on quotes that are 20 minutes old, open tax lots do not reflect the actual gains or losses your client would realize if you sold your shares.

Follow these steps to view your open tax lots.

1. Select the Client Accounts tab. Then, select the name of a client.
2. Select View Tax Information in the drop-down box next to the account, Folio, or Non-Folio Holdings that holds the securities you want to view and select Go.
3. On the Tax Information page, select the button next to View open tax lots, then select View Tax Information.

Every time you sell shares, a closed tax lot is created to track the date and the price of the sale. Follow these steps to view the amount of any gain or loss and whether it was short or long-term.

Follow these steps to view your open tax lots.

1. Select the Client Accounts tab. Then, select the name of a client.
2. Select View Tax Information in the drop-down box next to the account, Folio, or Non-Folio Holdings that holds the securities you want to view and select Go.
3. On the Tax Information page, select the button next to View closed tax lots, then select View Tax Information.