What are cost basis methodologies?
The cost basis method, or tax lot methodology, selected for crypto taxes could alter your capital gains and resulting tax bill. All River clients are defaulted to the FIFO (first in, first out) methodology, but clients may select from two additional options: LIFO (last in, first out) and HIFO (highest in, first out). Once a selection has been made, this selection will apply to all your transactions moving forward, although the mechanics will work differently on sales than withdrawals. A lot is unknown if it lacks a cost basis. For deposited bitcoin, the date used will be the date deposited with River unless a date acquired is entered.
For bitcoin sells, the following will be applied to your account based on your cost basis method selection:
FIFO | first-in known lots will be pulled first, then first-in unknown lots |
LIFO | last-in known lots will be pulled first, then last-in unknown lots |
HIFO | highest cost known lots will be pulled first, then oldest to newest unknown lots |
For bitcoin withdrawals and sends as well as internal account transfers, the following will be applied to your account based on your cost basis method selection:
FIFO | last to first unknown lots will be selected first, then last to first known lots |
LIFO | first to last unknown lots will be selected first, then first to last known lots |
HIFO | newest to oldest unknown lots selected first, then lowest to highest known lots |
Effective February 28, 2023, you will not be able to enter zero as a cost basis. If you have previously specified a zero cost basis, the following will be applied to your account based on your cost basis method selection for bitcoin sells:
FIFO | first-in known lots will be pulled first, then first-in zero lots, then first-in unknown lots |
LIFO | last-in known lots will be pulled first, then last-in zero lots, then last-in unknown lots |
HIFO | highest cost known lots will be pulled first, then oldest to newest zero lots, then oldest to newest unknown lots |
Additionally, the following will be applied to your account based on your cost basis method selection for bitcoin withdrawals and sends as well as internal account transfers:
FIFO | last to first unknown lots will be selected first, then last to first zero lots, then last to first known lots |
LIFO | first to last unknown lots will be selected first, then first to last zero lots, then first to last known lots |
HIFO | newest to oldest unknown lots will be selected first, then newest to oldest zero lots, then lowest to highest known lots |
River may exercise discretion when it comes to non-sale bitcoin transfers, but will follow the above order as reasonable.
It is your responsibility to ensure that the correct cost basis information is added to your deposited bitcoin. River will not be able to attest to the manually entered tax lot information. River can only attest to Bitcoin that you buy on the River platform.