Good synopsis of the potential impact of the FIFO proposal on tax management by Paul Bouchey of Parametric. The FIFO proposal wouldn’t eliminate tax management operations, but it would definitely change investors’ approach.


“One of the tax law changes proposed in the U.S. Senate bill, but not in the House of Representatives bill, would require investors to use a First In, First Out (FIFO) accounting methodology for tax lots when calculating capital gains tax. This would impact the way portfolios are managed with respect to taxes. Specifically, FIFO takes away some flexibility—instead of choosing the most favorable tax lot to sell, investors are forced to sell the oldest tax lot first. Assuming the provision makes it into the final tax bill, and that Congress is able to pass the bill in the next month or so, the new rule would become effective January 1, 2018. ”

To read the full article click here.