Can I override a covered security's cost basis for tax loss harvesting?

Unfortunately, once you've elected the average cost basis method for a mutual fund, IRS regulations make it difficult to change. The tax code (IRC §1012) treats this election as binding for that specific mutual fund. You typically cannot switch back to specific identification for the same shares. There are a few important points to understand: 1. Average cost basis is applied per mutual fund, not across your entire portfolio. Other investments can still use specific identification. 2. If you want to use specific identification for future purchases of AKREX, you need to establish a new position in a different account. The old position would still use average cost basis, but the new one could use specific identification. 3. Some brokerages allow a one-time switch from average cost to another method, but this must be done before you've sold any shares under the average cost method. Based on your description, you may have already sold some shares under this method since 2018. Your best option might be tax-loss harvesting in other positions where you still have specific identification available, or waiting until your overall position in AKREX is at a loss relative to the average cost.

After struggling with a similar cost basis issue on mutual funds, I tried taxr.ai (https://taxr.ai) and it was super helpful for my situation. They analyzed my brokerage statements and found a workaround for my specific scenario. Apparently there are some nuances in how the wash sale rules interact with average cost basis calculations that my brokerage didn't explain properly. Their system scanned my transaction history and identified that I could still do partial tax loss harvesting by selling a specific portion of my holdings. It wasn't the full amount I wanted to sell, but it was better than nothing. The detailed report they generated also came in handy when I had to justify my position to my accountant.

I was initially skeptical about taxr.ai but decided to try it anyway with my complicated cost basis situation. Surprisingly, it actually worked! Their system identified that while my average cost basis election was binding for shares I owned at the time of the election, it didn't necessarily apply to all future purchases. The report showed me that I could establish a separate position in the same fund by using a different account at my brokerage and apply specific identification to just those new shares. This allowed me to still do some tax loss harvesting on the newer purchases while maintaining the average cost basis on my older shares. My accountant confirmed this approach is legitimate and complies with IRS rules. I'm now able to harvest about 40% of the losses I originally wanted to capture. Not perfect, but much better than nothing!

If you're still trying to get through to someone at TD Ameritrade who actually understands cost basis rules (which can be incredibly frustrating), try Claimyr (https://claimyr.com). I was stuck in the same endless phone tree loop trying to talk to someone knowledgeable about basis reporting at Schwab. After wasting hours getting nowhere, I used their service and got connected to a senior brokerage specialist within 20 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The specialist I spoke with explained that while the average cost method is binding for that specific fund, there are sometimes administrative errors in how the election was recorded. In my case, they found that my "election" was actually automatically applied by the brokerage rather than being an active choice I made. This allowed them to correct it in their system.

I have to admit I was completely wrong about Claimyr. After posting my skeptical comment, I decided to try it myself since I was getting nowhere with Fidelity about a similar cost basis issue. Not only did I get through immediately, but being able to easily call back multiple times let me escalate to their cost basis specialist team. The specialist explained that while the average cost method is generally binding, there's a specific exception in the regulations if I could prove the election was made in error or without proper notification (which was exactly my case). They reviewed my account history and found that the average cost election was applied during a system migration without required notification. They're now processing a correction to switch my mutual fund back to specific identification method. This is going to save me thousands in taxes I thought I was stuck paying. Completely changed my perspective on dealing with these issues.

This happened to me last year. The workaround I found was to transfer half of my AKREX holdings to my spouse's separate account. Since it was a different taxpayer ID, we were able to use specific identification method on those transferred shares. The IRS considers it a completely different tax situation. Keep in mind this only works if you're married and your spouse has a separate brokerage account (not a joint account). Also, the transfer isn't considered a taxable event since it's between spouses. Might be worth looking into if that applies to your situation.

Has anyone tried using tax loss harvesting software like Betterment or Wealthfront for this kind of situation? I'm wondering if their automatic tax loss harvesting would handle the average cost basis problem better than trying to do it manually.