What is a Tax Lot?

Tax lots are documents that relate to any and all transactions that have to do with the investment portfolio. The tax lot will detail the terms of each transaction that involves each security in the portfolio, and identify the tax implications associated with teach line item in the lot. This record of tax purchases can come in very handy when it is time to calculate and pay taxes for a given period. Along with forming the basis for tax lot accounting, the process also provides a point of reference for creating investment strategies. Because a tax lot will include the taxable purchase date for each transaction, it is possible to determine which shares in the portfolio to sell at some point in the future and thus realize the maximum amount of tax advantage. Along with the taxable purchase date, the typical tax lot will include the proposed date of sale, the cost basis associated with the security, and the transaction size that is involved with the proposed sale. In addition to these ...  more

A tax lot is a record-keeping method that tracks the dates of purchase and sale, cost basis, and transaction size for each security in an account portfolio.  more