Everytime you buy shares, an open tax lot is created to track the date and price of the purchased security, even if you already owned shares of the same stock. When viewing your holdings within your Frec Self-Managed Portfolio, you will be able to view your open tax lots for each stock position, which consists of at least one open tax lot.
Each open tax lot will show you the purchase date, share quantity, cost basis (the cost of that lot), the unrealized profit (in green) or loss (in red) and short-term (S) or long-term (L) holding indicator. Even if you have an overall unrealized gain in a position, that position may have tax lots that are at a loss (the purchase price of the lot is higher than the current market price of the stock).
To avoid capital gains while selling, you can sell specific open tax lots that are at a loss. You can view and submit orders for any open tax lots within your Self-managed portfolio holdings or the Trade screen, after entering a symbol in your hold Self-managed portfolio, selecting Sell and Sell specific tax lots. Once an open tax loss is sold, it will become a closed tax lot and no longer be displayed in your account.
You can also let Frec do it for you. Auto convert lets you choose stocks in your self-managed stock portfolio to monitor daily for lots that are at a loss (> 3%), and automatically sell it and reinvest into direct indexing. You may want to do this for stock positions you wish to diversify or for ETFs that you want to convert into a direct index without incurring capital gains taxes. Note: This is not available for symbols that are part of your direct index holdings.
- Go to your direct indexing portfolio page
- Under “••• Actions”, select “Auto conversion settings”
- Select the stocks you want to turn on auto conversion for, or turn on the global “All eligible stocks”. This selection will affect any future stocks you transfer or purchase on Frec.
- Save your changes. You can return here to edit your settings at any time.
- Every morning we’ll monitor for lots at a loss greater than 3%, and if so we’ll sell it and reinvest it into your direct index. You’ll see “Sell XXX (Auto conversion)” entries in your Activity page, and a corresponding “Deposit (Auto conversion)”entry in your Direct Indexing Activity page.