Cost Valuation Methods: FIFO, LIFO, Identified Shares

What this video covers

• Why multiple purchases of the same stock create separate tax lots, and why the chosen method directly drives the tax bill
• Why First-In First-Out (FIFO) is the automatic default when the investor does not specify, and how exam writers exploit that silence
• How Last-In First-Out (LIFO) sells the newest highest-cost shares first to shrink gains in a rising market
• How specific identification gives the investor maximum flexibility, and the hard rule that the lot must be designated at the time of sale, not after the fact
• Why the same trade produced a $2,500 gain under FIFO versus a $500 gain under LIFO in our worked example
• The full rising-versus-declining-market matrix: largest gain, smallest gain, largest loss, smallest loss by method
• How different tax lots can carry different holding periods, so the method choice can flip a gain between short-term and long-term capital gains treatment