Tax-lot accounting (FIFO / HIFO / SpecID)

Problem: You have a live taxable account with multiple lots of AAPL bought at different prices. When you sell, the IRS lets you choose which lots to dispose of. The choice matters — it can save real money.

Solution: Configure mts1b-treasury's tax-lot ledger to optimize.

The three methods

Method	What it does	When to use
FIFO (default)	Sell oldest lots first	Simplest; brokers' default
HIFO	Sell highest-cost lots first (minimize current-year gain)	Defer taxes
SpecID	Operator picks specific lots	Maximum control

Setup

mts mts1b-treasury fund edit --fund-id live-equities \
  --tax-lot-method hifo

Choices: fifo, lifo, hifo, loifo (lowest cost first), specid.

Walking example

You own 4 lots of AAPL:

Lot	Open Date	Qty	Cost basis	Market price
L1	2025-01-15	100	$150	$200
L2	2025-06-01	50	$200	$200
L3	2025-12-10	200	$180	$200
L4	2026-03-20	100	$195	$200

You want to sell 200 shares to realize $10k of gross cash (irrelevant — we sell 200 either way).

Under FIFO

Sell L1 (100 @ $150 → $200): gain = 100 × $50 = $5,000  short-term*
Sell L2 (50  @ $200 → $200): gain = 50  × $0  = $0      short-term
Sell L3 (50  @ $180 → $200): gain = 50  × $20 = $1,000  short-term
                                                ─────────
                                  Total gain:   $6,000 (all short-term)

*L1 was held > 1 year at the 2026-03-20 sale, so it's long-term, but L2 + L3 are short-term.

Under HIFO

Sell L4 (100 @ $195 → $200): gain = 100 × $5  = $500    short-term
Sell L2 (50  @ $200 → $200): gain = 50  × $0  = $0      short-term
Sell L3 (50  @ $180 → $200): gain = 50  × $20 = $1,000  short-term
                                                ─────────
                                  Total gain:   $1,500 (all short-term)

HIFO realized $4,500 less taxable gain. At the U.S. short-term rate (37% top bracket), that's ~$1,665 of tax deferred until the remaining lots are sold.

Under SpecID

You explicitly pick:

mts mts1b-oms order submit \
  --fund-id live-equities \
  --symbol AAPL --side sell --qty 200 \
  --tax-lots L1:100,L3:100

This sells L1 entirely (long-term gain of $5,000 at 15-20% LT rate) + 100 of L3 (short-term $2,000). For some operators, paying LT rate on a known win is preferable to deferring more ST gain.

Wash-sale handling

If you sell at a loss and rebuy within 30 days, the IRS disallows the loss. mts1b-treasury tracks this automatically:

# After selling at a loss
sale = await oms.sell_order(symbol="MSFT", qty=100)
# realized loss = -$1,200

# Within 30 days, you buy back
buy = await oms.buy_order(symbol="MSFT", qty=50)

# mts1b-treasury detects the wash sale:
#   Disallows 50 / 100 of the loss = $600
#   Increases cost basis of the new 50 shares by $600 (the disallowed amount)

Reported in the settlement report under "Wash-sale adjustments".

Across funds (be careful)

Wash-sale rule applies across all accounts owned by the same taxpayer — including IRA + spouse's accounts. mts1b-treasury only tracks across funds you've registered. For full coverage, register all funds (even retirement) so the wash-sale tracker sees them.

mts mts1b-treasury fund create --fund-id ira-fidelity --type read-only --broker fidelity

read-only funds are tracked for tax purposes but not traded by MTS1B.

Long-term vs short-term

Holding period crosses 365 days → long-term capital gains (currently 0/15/20% federal, vs 10-37% short-term).

mts1b-treasury warns you before closing positions that are close to crossing the threshold:

mts mts1b-oms order submit --fund-id live-equities --symbol AAPL --side sell --qty 100

⚠️ Holding-period warning:
  Lot L1 (100 shares @ $150) — held 358 days as of today.
  Wait 8 more days to qualify for long-term capital gains rate.

  Estimated tax saving: ~$1,000 (at 37% ST vs 15% LT bracket).

  Proceed anyway? [y/N]

Disable warnings if they're noisy:

mts mts1b-treasury config --no-holding-period-warnings

Reporting

End of year:

mts1b-report settlement --fund-id live-equities --year 2026

Outputs:

• 2026-realized-gains.pdf — full lot-by-lot breakdown
• 2026-realized-gains.csv — TurboTax-importable format
• 2026-form-8949.pdf — drafted Form 8949 (US: sales of capital assets)

⚠️ The PDF is a draft for your accountant. MTS1B does not file your taxes.

When to override the default

Scenario	Recommended method
You're in a high-income year and want to defer	HIFO
You're in a low-income year and want to harvest losses	LIFO/LOIFO
You have a specific lot crossing into long-term in days	SpecID (wait, then sell oldest)
You're a long-term holder with mostly ST losses	FIFO is fine

See also

• mts1b-treasury — tax-lot ledger
• mts1b-reportslibrary — settlement reports
• Tutorial: Multi-fund treasury — full setup