It depends if you are a TEA PARTY member or a Marxist community organizer. The later... you wont be reviewed by the IRS and anything you do will be overlooked by the IRS. If, however, you are a TEA PARTY member or think the U.S. Constitution is kewl... you will be audited and harrassed until you pay more than you should.
You will be taxed from the shares of IAG you sold short term capital gain based on your tax income bracket. The shares of IAG you bought @ 7.00 will remain in your account, unless you sell them on loss. However, if you continue to hold them till it appreciate its value over certain period of time 1 year minimum, you will be taxed long term capital gain. If you sell on losses, your accountant will make adjustments on your stock profits and losses according to your income bracket. Cheers...
Just make sure that your broker knows what method you used or your year end brokerage statement will not square up. You can specify lowest cost, highest cost, FIFO, LIFO, etc with your broker. If you change methods for each trade you need to specify the tax lot used on the trade when you place the order, or have your broker adjust your records to the method you used so that your year end brokerage statement matches how you report it to the IRS. All brokerages report FIFO to the IRS unless you have specifically requested they use a different method.
Wow, this way of doing things is much more flexible than Canada. As far as I know, in Canada you are just working with averages. When you trade shares, your total shares owned (of the same symbol) are set to the new average price since your last purchase or sell. It's really nice that the IRS allows you that much flexibility in the way you settle investment taxes.