Article Summary
This article explains River's three cost basis methods — FIFO, LIFO, and HIFO — how each affects lot selection.
The cost basis method you choose can impact your capital gains and your taxes. Upon account signup, River automatically applies FIFO, or First In, First Out, as the cost basis method. However, you can select from two additional cost basis methods:
- LIFO, or Last In, First Out
- HIFO, or Highest In, First Out
After setting a different cost basis method, this selection will apply to all your transactions moving forward. For information on how to change your cost basis method, please see this Help Center article.
What are unknown lots?
A bitcoin lot is considered unknown if it doesn't have a cost basis. For any bitcoin deposited into your River account, the default acquisition date will be the deposit date, unless you manually enter the actual date the bitcoin was originally acquired.
Any bitcoin purchased on River will automatically have a cost basis and is considered a known lot.
How does my cost basis method affect my transactions?
The cost basis method selection works differently depending on whether you are selling or sending your bitcoin. Please see the tables below for additional information.
When selling bitcoin, the cost basis logic will apply:
| FIFO |
Oldest, known lots are selected. Then, oldest, unknown lots are selected. |
| LIFO |
Newest, known lots are selected. Then, newest, unknown lots are selected. |
| HIFO |
Highest-cost, known lots are selected. Then, oldest, unknown lots are selected. |
When sending bitcoin or when internally transferring between River accounts, the cost basis logic will apply:
| FIFO |
Newest, unknown lots are selected. Then, newest, known lots are selected. |
| LIFO |
Oldest, unknown lots are selected. Then, oldest, known lots are selected. |
| HIFO |
Newest, unknown lots are selected. Then, lowest-cost, known lots are selected. |
Example — Satoshi's Bitcoin Purchases
Satoshi purchased all three lots directly on River, so these are known lots. For more information on adding cost basis information to unknown lots, please see this Help Center article.
| Lot 1 | Lot 2 | Lot 3 | |
| Purchase Date | January 2022 | June 2023 | March 2024 |
| Cost Basis | $20,000 | $40,000 | $30,000 |
| Label | Oldest | Highest Cost | Newest |
When selling 1 BTC for $60,000, the cost basis logic will apply:
| Method | Rule | Lot Selected | Cost Basis | Gain / Loss |
| FIFO | Oldest known lot first | Lot 1 — Jan 2022 | $20,000 | +$40,000 |
| LIFO | Newest known lot first | Lot 3 — Mar 2024 | $30,000 | +$30,000 |
| HIFO | Highest-cost known lot first | Lot 2 — Jun 2023 | $40,000 | +$20,000 |
When sending bitcoin out of your River account or when internally transferring between River accounts, the cost basis logic will apply:
| Method | When Selling | When Sending |
| FIFO | Oldest known lot (Lot 1 — $20,000) | Newest known lot (Lot 3 — $30,000) |
| LIFO | Newest known lot (Lot 3 — $30,000) | Oldest known lot (Lot 1 — $20,000) |
| HIFO | Highest-cost known lot (Lot 2 — $40,000) | Lowest-cost known lot (Lot 1 — $20,000) |
River reserves the right to exercise discretion regarding non-sale bitcoin transfers, but will adhere to the above ordering in most cases.
It is your responsibility to ensure that the correct cost basis is added to your deposited bitcoin. River cannot attest to any manually entered tax lot information. River can only attest to bitcoin bought on River.
Please note that River does not provide any financial, investment, legal, or tax advice. River is not responsible for any tax consequences related to or resulting from changing the cost basis method on your account. Consult a tax professional for guidance on your personal situation.