If an individual sells 500 shares of stock without specifying the block, which method is used to determine the cost of shares sold?

When an individual sells shares of stock without specifying which shares are being sold, the method typically used to determine the cost of shares sold is the First in, First out (FIFO) method. This method assumes that the earliest shares purchased are the first ones sold.

In many accounting practices and tax regulations, when no specific identification is provided for which shares are sold, FIFO is the default method because it simplifies tracking and calculating gains or losses. For instance, if an investor bought shares of stock at different prices over time, FIFO would mean that the shares purchased first are the ones assumed to be sold first, thereby potentially affecting the capital gains calculation based on the older (and often lower) purchase prices.

This method is widely recognized and commonly used in various scenarios when there’s ambiguity about which specific shares are being sold. Other methods, such as Last in, First out (LIFO) and Averaged cost method, have their own specific applications and rules, but FIFO is the default in the absence of specific identification, making it the appropriate choice in this scenario.