Use specific identification accounting when selling fund shares.

Use specific identification accounting when selling shares. The IRS generally calculates gains and losses on fund shares with “first-in, first-out” (FIFO) accounting. That means using the price that is paid for the shares that have held the longest. Specific identification accounting allows a taxpayer to sell select shares to provide the best tax result. This method of accounting can create a specific amount of gain that can be matched against an offsetting loss. Specific identification accounting requires more paperwork than the FIFO method.