Article Summary
This article explains River's four cost basis methods (FIFO, LIFO, HIFO, and LOFO), how your selected method is applied differently to sells and sends, and how River decides which bitcoin is used in each transaction.
The cost basis method you choose can impact your capital gains and your taxes. When you sign up, River automatically applies FIFO, or First In, First Out, as the cost basis method for sells, and LIFO, or Last In, First Out, as the cost basis method for sends.
Once you select a different cost basis method, it applies to all transactions of the same type moving forward. For information on how to change your cost basis method, please see this Help Center article.
How does my cost basis method affect my transactions?
When selling bitcoin, the following logic applies:
| 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. |
| LOFO |
Lowest-cost known lots are selected. Then, oldest unknown lots are selected. |
When sending bitcoin out of your River account or transferring between River accounts, the following logic applies:
| FIFO |
Oldest unknown lots are selected. Then, oldest known lots are selected. |
| LIFO |
Newest unknown lots are selected. Then, newest known lots are selected. |
| HIFO |
Newest unknown lots are selected. Then, highest-cost known lots are selected. |
| LOFO |
Newest unknown lots are selected. Then, lowest-cost known lots are selected. |
Your sell and send cost basis methods are set separately, so changing one does not change the other.
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 is the deposit date, unless you manually enter the date the bitcoin was originally acquired. Bitcoin received from another River user, including through River Links, is an unknown lot.
Any bitcoin purchased on River automatically has a cost basis and is considered a known lot.
Example — Satoshi's Bitcoin Purchases
Satoshi purchased three lots of 1 BTC each directly on River, so all three 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, Lowest Cost | Highest Cost | Newest |
When selling 1 BTC for $60,000, the following logic applies:
| 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 |
| LOFO | Lowest-cost known lot first | Lot 1 — Jan 2022 | $20,000 | +$40,000 |
River reserves the right to exercise discretion regarding non-sale bitcoin transfers but will adhere to the above ordering in most cases.
Are there transactions that do not use my cost basis method?
Yes. Auto-convert uses the bitcoin from the deposit that triggered it instead of your cost basis method. If that bitcoin no longer covers the full sale, your cost basis method for sells applies to the entire sale.
It is your responsibility to ensure that the correct cost basis is added to your deposited bitcoin. River can only attest to bitcoin bought on River and cannot attest to any manually entered tax lot information.
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.