A lot-selection approach that treats the units with the highest cost basis as sold first, minimizing current gain. It is a form of specific identification, not a separate IRS method.
HIFO lowers this year's gain at the cost of holding lower-basis lots for later. It requires lot-level records and identification at the time of sale, per wallet.
It recognizes specific identification. HIFO is simply a rule for which lot you identify; it is allowed if your records support the identification.
Source: Treas. Reg. 1.1012-1(j)
Last reviewed September 17, 2026. Tax rules change; confirm current law before acting.
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