You don't have to use any particular approach, you can choose to match up purchases and shares however you wish (FIFO, LIFO, per-sale tax optimization). You jus

You don't have to use any particular approach, you can choose to match up purchases and shares however you wish (FIFO, LIFO, per-sale tax optimization). You just need to make sure you track what you're buying and selling, so that every purchase and sale are matched. As of 2011, your broker does this for you -- and different brokers offer different levels of sophistication in their tracking. Some only offer FIFO and LIFO, others will do more complex optimizations for you. For purchases before 2011, you need to save info on your purchases lot-by-lot and match them up yourself. This has screwed me several times, when I can't remember when I bought a certain stock and can't put my hands on the appropriate statements at tax time. Royal pain.