Understanding the Differences in P&L Calculations and Why They May Not Match Alpaca Trade Confirmations or Tax Documents
When you invest in equities via the OPTO app you will encounter two ways of tracking your profits or losses (P&L). On one hand, the brokerage (in this case, Alpaca) uses First In, First Out (FIFO) rules for tax reporting, which will appear on your trade confirmations and end-of-year tax documents. On the other hand, in the OPTO app, your P&L for your portfolio, including individual Folios are based on each specific buy or sell transaction.
If you notice that the P&L calculations in your Folio tracking differ from those shown on Alpaca’s trade confirmations and tax documents, there is no need to worry. Below is an explanation of why these discrepancies can arise—and why they do not affect your overall account return or final tax obligations.
1. How Your Folio or Position List Calculates P&L
We show your gain or loss based on the specific positions within that Folio from the time of buy/sell. Essentially, each Folio is treated as if it is its own mini-portfolio. The position P&L you see in a Folio reflects:
The price at which the shares in that Folio were purchased
The price at which those same shares were sold (if applicable)
Note that dividends and other distributions are paid in to your main account and are not included in the P&L for a Folio.
This method gives you a quick understanding of how a particular group of shares, in a specific Folio, is performing over the period you’ve held them. If you have multiple Folios containing the same stock, each Folio will track the cost basis and gains/losses independently.
2. Alpaca’s Use of FIFO for Trade Confirmations and Tax Documents
Brokerage firms in the United States are generally required to apply FIFO (First In, First Out) as the default method for capital gains calculations and tax reporting, unless you specifically elect another method (e.g., Last In, First Out, Specific Identification, etc.). At this point in time, Alpaca is only offering the FIFO method.
What is FIFO?
FIFO: The first shares you purchase (chronologically) are the first shares you are considered to have sold when you make a sale.
Tax reporting: When the brokerage calculates your gains or losses for official trade confirmations and year-end tax documents (Form 1099-B), it defaults to FIFO to determine cost basis and calculate gain or loss.
Why it Matters
Consolidated Holdings: If you hold the same stock across multiple Folios or accounts, Alpaca treats them as part of one big holding for tax and regulatory reporting purposes. When you sell that stock, Alpacae “locates” the first shares you bought in your overall account history—regardless of which Folio you may think you’re selling from.
Trade Confirmations: After a sell order is executed, Alpaca will generate a trade confirmation showing how many shares were sold and the cost basis for those shares based on FIFO.
Tax Documents: At the end of the year, Alpaca will compile your transactions and generate tax documents (typically a 1099-B). These documents also reflect FIFO and the associated cost basis and gains/losses.
3. How FIFO Affects Individual Folios
Let’s say you own Apple (AAPL) in two different Folios: Folio X and Folio Y. You decide to sell some shares of AAPL that you perceive to be in Folio X. However, if the AAPL shares in Folio Y were purchased earlier (chronologically), those will be considered the “first in” under FIFO rules. So for official brokerage reporting and tax documents:
The shares in Folio Y may actually be sold first, according to FIFO.
Your Folio X might still show a different P&L because you are tracking as if you sold the shares in Folio X itself.
Overall account P&L is unaffected
This discrepancy leads to confusion if you compare your Folio’s P&L directly to the trade confirmations from Alpaca. One system is tracking the cost basis per folio, while the official tax reporting is combining all shares across all folios for FIFO.
4. Why Your Overall Account Return Still Matches
Despite these differences, your overall account return remains accurate. Whether you use FIFO, LIFO (Last In, First Out), or any other identification method:
Your total market value and total cost basis across the entire account remain the same.
The total gains or losses across all shares of the same stock are identical in the end.
Tax implications are ultimately determined by FIFO, ensuring you comply with regulatory requirements.
5. Key Takeaways
Different Calculation Methods: Individual Folio P&L reflect the “purchase price” and “sale price” specific to that Folio, but Alpaca uses FIFO across your entire account.
Possible Discrepancies: When you look at your trade confirmations or year-end tax documents, the cost basis and gains/losses might not match exactly what you see in in the OPTO app if you hold the same stock in multiple places.
Consistent Total Return: Your overall account return remains accurate, because ultimately all shares are accounted for. It’s just that the method of matching specific shares sold can differ.
No Impact on Final Tax Liability: Regardless of how you or your portfolio tool tracks individual Folio P&L, the brokerage’s FIFO method is what determines what appears on your 1099-B and how you calculate taxes due.
Understand the Method: If matching your portfolio data to your official trade confirmations and tax documents is critical, you might consider explicitly tracking FIFO at the Folio level outside of the OPTO app—or be aware that there will be differences and why.
In Summary
Discrepancies between your Folio-based P&L and Alpaca’s FIFO-based trade confirmations and tax reports do not indicate any error or problem in your investments. They simply reflect the difference in how cost basis is calculated at the folio level versus how it is calculated at the brokerage account level for compliance and reporting. Knowing this allows you to confidently review your transactions and returns, understanding that your overall account performance remains consistent—even if the breakdown at a Folio level looks different.