CGT FIFO rules and B&B

Diarmuid

I've a question about the FIFO rules when calculating cgt.

If I hold some shares in company X that were bought over a number of years which now have accrued a gain. I can sell them today and the gain is balanced out by losses on other shares so that I don't owe a CGT gain in this year.

At this point I buy some more shares in company X is this seen as a violation of the "bed and breakfast" rule? I am not offsetting my gains on company X with this transaction but the act of buying and sell the shares in the same company seems like I might be sailing close to the wind?

I don't think I'm violating the rule (in letter or spirit) but I'd appreciate any thoughts

cgt1.pdf wrote:

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. Furthermore, where a loss accrues on the disposal of shares and shares of the same
class are acquired within a four week period, the loss is not available for offset against any other gains arising.
Instead the loss is only available for set off against any gain that might arise on the subsequent disposal of the shares
so acquired in the four week period - this provision does not apply where there is a gain on the disposal.

dogsears

You're fine.

The rule is about preventing people from selling shares at a loss and then reacquiring the same shares within 4 weeks i.e. realising a loss without any real change in what they hold. You're not doing that.

Marcusm

dogsears wrote: »

You're fine.

The rule is about preventing people from selling shares at a loss and then reacquiring the same shares within 4 weeks i.e. realising a loss without any real change in what they hold. You're not doing that.

Eh no, the identification rules apply irrespective of whether there is a gain or a loss; the loss restriction applies on the resulting loss. OP: are you contemplating re acquiring the shares within 4 weeks? Could you use a cfd/contract for differences for the new holding?

Diarmuid

Yeah I might just play it safe and hold off for the 4 weeks

dogsears

Marcusm wrote: »

Eh no, the identification rules apply irrespective of whether there is a gain or a loss; the loss restriction applies on the resulting loss. OP: are you contemplating re acquiring the shares within 4 weeks? Could you use a cfd/contract for differences for the new holding?

Here is what the Revenue Guidance notes on Section 581 say:

"In the case of a disposal by a person of shares of the same class as shares which the
person acquired in the 4 weeks preceding the disposal, the normal first in first out rule
does not apply. Instead, the shares acquired in the 4 week period are treated as the shares
actually disposed of.

Where the number of shares disposed of exceeds the number of shares acquired within
the 4 week period, the excess comes within the normal first in first out rule.

If shares are disposed of and shares of the same class are reacquired within 4 weeks after
the disposal, any loss arising on the disposal is only allowable against any gain that may
accrue on the disposal of the shares reacquired in the 4 week period. "

It's pretty clear - if you buy shares and then sell within the next 4 weeks, FIFO is suspended and the shares sold are treated as the ones bought within the prior 4 weeks. OP is not proposing this so its not a problem.

If you sell and then rebuy within the next 4 weeks, any loss arising on the sale is restricted. OP says the sale will give rise to a gain, so again, not a problem.

OP, if you want to wait 4 weeks, that's obviously fine, but you don't need to.