Technical Definition

FIFO

FIFO is an accounting identification method that treats the earliest acquired units of an asset as the first units disposed of when applicable rules require or permit that method.

By Crypto University Editorial
Cost basisTaxable eventForm 1099-DA

✦ Key Insight

The identification method can affect which cost basis and holding period are assigned to a disposal, which can change calculated gains or losses.

✕ Common Misconceptions

FIFO is not universally the only permitted method. Tax rules and recordkeeping requirements vary.

Detailed Explanation

Investors can acquire the same cryptocurrency at different prices and dates. FIFO assigns the oldest available units to a later disposal. Tax treatment depends on jurisdiction and whether valid specific identification was made.

In Practice

“If you bought 1 ETH in January and another in June, a FIFO disposal of 1 ETH would generally identify the January unit first under a FIFO rule.”

Dig Deeper

Cost basis

Cost basis is the tax value assigned to an asset, generally based on acquisition cost and applicable adjustments, that is used when calculating gain or loss.

Form 1099-DA

Form 1099-DA is a United States tax information form used by applicable brokers to report digital asset sales or dispositions to customers and the IRS.

Taxable event

A taxable event is a transaction or activity that creates a tax consequence under the rules of the relevant jurisdiction.

Capital Gain

A capital gain is the positive difference recognized when a capital asset is disposed of for more than its tax basis.

Specific Identification

Specific identification is a tax-lot method that matches a disposal to specifically documented units of the same asset.