CGT - multiple buys within 4 weeks, fifo vs lifo

[lowriskgambler]

Hi,

Seeking clarification on the 4 week rule. I am confused on what rule to use for share matching where there are multiple share acquisitions within the same 4 week window follow by a partial sale.

Specific scenario that could happen with desynchronised RSU and ESPP vests.

Date	Tx
1 Feb	BUY 500 @ 5	e.g. RSU net of income tax	outside of 4 week window
1 May	BUY 25 @ 10	e.g. RSU net of income tax	start of 4 week window
5 May	BUY 100 @ 15	e.g. ESPP net of income tax	within 4 week window
10 May	SELL 100 @ 20		within 4 week window

The question is how to match May 10 sale of 100 shares with other transactions for calculating CGT due. It is clear that we need to use the 4 week rule, so we only have two options then:

1. Use LIFO within the 4 week period and match SELL 100 @ 20 with BUY 100 @ 15, resulting in 500e gain.
2. Use FIFO within the 4 week period and effectively split the sell into two parts. First, match SELL 100 @ 20 with BUY 25 @ 10 and BUY 75 @ 15, resulting in 625e gain.

So which rule is the correct one here? Or can I choose to use whatever benefits me the most - so LIFO within 4 weeks here.

Revenue does not give an example for multiple purchases and 4 week rule. Revenue also refused to give me advice when I asked them.
I couldn't find anything beyond these statement, which to me are ambiguous:

The FIFO rules are modified in any case where shares of the same class are bought and sold within a period of four weeks. Where shares are sold within four weeks of acquisition the shares sold are identified with the shares acquired within that period.

581.—(1) For the purposes of the Capital Gains Tax Acts, where the same person in the same capacity disposes of shares of the same class as shares which such person acquired within 4 weeks preceding the disposal, the shares disposed of shall be identified with the shares so acquired within those 4 weeks.

Under normal rules, the asset purchased first is treated as the first asset sold (the first in first out (FIFO) rule) but under this rule where there is a sale within four weeks after a purchase the item treated as sold is the asset purchased within four weeks of the sale and not the asset acquired earlier.

Thanks in advance

 

[MugsGame]

I don't know the official answer. Either seems defensible provided you are consistent should similar arise again.

One observation given the extreme increase in value in your figures: the reckonable basis for CGT is the fair market value on date of acquisition. Not the discounted value which you've already paid income tax for.