Specific Identification
Definition
A cost basis method that lets you choose exactly which shares or lots to sell, giving maximum control over your tax outcome for each transaction.
Specific identification is the most flexible cost basis method available. Instead of following a predetermined order like FIFO or LIFO, you explicitly choose which tax lots to sell in each transaction. This gives you precise control over the tax consequences of every sale.
For example, if you bought 100 shares of a stock at $50, another 100 at $75, and another 100 at $90, and the current price is $80, specific identification lets you choose: sell the $90 lot to realize a loss, the $50 lot to realize a gain, or the $75 lot for a minimal gain. Each choice produces a different tax result.
To use specific identification, you must adequately identify the shares at the time of sale and receive confirmation from your broker. Most modern brokerages support this through their trading platforms, allowing you to select specific lots when placing a sell order.
The main advantage is tax optimization — you can harvest losses when needed, minimize gains when possible, and manage your holding periods to qualify for long-term rates. The downside is complexity; every sale requires a deliberate choice, and poor record-keeping can disqualify the method.
For crypto, specific identification is particularly valuable since many investors have purchased the same token multiple times at varying prices. However, you must maintain detailed records showing which specific units were disposed of in each transaction.
Where this appears in Clarity
Clarity automatically tracks and calculates these concepts across your connected accounts.
Related Terms
Frequently Asked Questions
How do I use specific identification with my broker?
Most brokerages let you select specific lots when selling through their platform or by contacting them before the trade settles. You must identify the lots at the time of sale, not after the fact. Check your broker's settings for tax lot selection options.
Can I use specific identification for crypto?
Yes, the IRS allows specific identification for crypto if you can adequately identify which units are being sold. This requires records showing the date, time, amount, and cost of each acquisition, and which specific units were disposed of.