Highest in, first out (HIFO) is an automated accounting method under the rules of Specific Identification.
As stated in Q40 on the IRS Frequently Asked Questions on Virtual Currency Transactions, Specific Identification can only be applied against units held in a "single account, wallet, or address."
When utilizing Specific Identification with HIFO, a taxpayer is taking a specific unit of cryptocurrency with the highest cost basis, compared to all other specific units within that exchange or wallet, and disposing of that unit first.
Because a taxpayer must be able to identify specific units for this type of tax disposal optimization, HIFO Universal isn’t a permissible accounting method as it doesn’t allow for identification of specific units.
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