R102 – What Each Cost Basis Method Means

FIFO (First In, First Out)

→ The first assets you purchase are the first assets you sell.

→ Common in the United States, Europe, and many other countries.

→ Example: If you bought 1 $SOL at $20 and another 1 $SOL at $40, then sold 1 $SOL, the sale would use the $20 cost basis.

LIFO (Last In, First Out)

→ The most recent assets you purchase are the first assets you sell.

→ Sometimes permitted in the U.S. and Italy.

→ Example: Using the same scenario, the 1 $SOL sold would use the $40 cost basis.

HIFO (Highest In, First Out)

→ The assets with the highest purchase price are sold first.

→ Often used to minimize taxable gains.

→ Example: If you bought 1 $SOL at $20 and another at $40, the $40 purchase would be used as the cost basis.

LCFO (Lowest Cost, First Out)

→ The assets with the lowest purchase price are sold first.

→ Can maximize gains (and therefore taxes).

→ Example: In the same scenario, the $20 purchase would be used as the cost basis.

HMRC (Share Pooling)

→ Required in the United Kingdom.

→ Assets of the same type are grouped into “pools” with an average cost basis.

→ Sales are matched against the pool rather than individual purchase lots.

CRA (Adjusted Cost Basis, ACB)

→ Required in Canada.

→ Each purchase adjusts the average cost basis of your holdings.

→ Sales are matched against the new adjusted average.

Average Cost Method

→ Required in Japan, and permitted in Australia.

→ Similar to CRA/ACB: each new purchase updates the average cost basis.

✅ Knowing what each cost basis method means will help you choose the right one in Netrunner (see HT202 – How to Select Your Cost Basis Method).

Updated on: 28/01/2026