[USER]

Question about transferring money from one brokerage firm to another. Initially I was told that they would just move the money and there would be no tax implications. Then they moved the money and I saw I am being taxed for short term capital gains on fractional shares. I had FIFO selected and had initially bought all my stocks years ago.

I dollar cost averaged over time. After one month of going back and forth with Vanguard where they first told me it was an error they would fix so that it said long term capital gains since I had for years, today they tell me they won’t be fixing it.

They said FIFO applies to the transfer and not what was sold.

They transferred FIFO and then sold what was left (which obviously at that point was what I bought last). Can someone tell me if this was their experience when transferring funds?

My financial advisor at the company I transferred to also doesn’t think Vanguard did it right since he said FIFO should have been applied to what I sold and not what I transferred.

[Albert]

The problem is that fractional shares cannot be transferred in kind through the ACAT system. It must be liquidated and transferred in cash form, so yes you will incur a taxable event on those transactions.

[Jessica]

Hi! I used to work at a brokerage firm. When this happens, you should be able to update and adjust the lots, there SHOULD be a form somewhere to adjust the lots specified. Get it in writing, to a secure message center, not via phone call. Basis is reported to the IRS. Getting it in writing is a method that allows them to get approval from managers to make the change.

Also, FIFO is always the default unless otherwise specified. I find this super odd.

[Author]

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