Wednesday, December 29, 2010

First-in First-out

First-in, first-out or FIFO is another method for determining the starting price of mutual fund shares when you sell or redeem your investment. This method is used in the US for tax purposes, and will usually result in calculating a capital gain, and hence a tax liability. The method of calculating on a first in first out basis is to assume that the shares you have sold are the first ones that you bought (which tend to be a a lower price - over a certain time period - thus the larger capital gains).

Synonyms: FIFO

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