Need some help understanding how Schwab processes trade lots when using the Tax Lot Optimizer — the same matching method PortfolioCenter calls Beneficial Tax?
The method is designed to sell lots in the order that will take losses before and gains. Within losses, short-term losses are taken before long-term losses, Within gains, long-term gains are taken before short-term gains.
As far as I can tell, length takes precedence over dollar amount. For example, if there is one lot with a short-term loss $5.00 and one lot with a long-term loss of $5000, the short-term $5 loss will be sold before the long-term $5000 loss — which may not be what you intended.
After consulting with Tech Support, here’s what I learned about the order lots are sold using Tax Lot Optimizer:
| Lot Type | Description |
| 1. Short-term Losses | Lots reflecting short-term losses. If there are several lots with short-term losses, they are processed from greatest loss to least loss. [spacer size=”20″] |
| 2. Long-term Losses | Lots reflecting long-term losses. If there are several lots with long-term losses, they are processed from greatest loss to least loss. [spacer size=”20″] |
| 3. Short Neutral | Short-term lots with neither a gain nor a loss. [spacer size=”20″] |
| 4. Long Neutral | Long-term lots with neither a gain nor a loss. [spacer size=”20″] |
| 5. Long-term Gains | Lots with a long-term gain. If there are several lots with long-term gains, they are processed from least gain to greatest gain.[spacer size=”20″] |
| 6. Short-term Gains | Lots with a short-term gain. If there are several lots with short-term gains, they are processed from least gain to greatest gain.[spacer size=”20″] |
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