How it works
Specific identification lets you choose which units you are selling, provided you can identify them by acquisition date and cost and the choice is made no later than the time of sale. For broker accounts, that usually means instructing the broker before the trade settles; for self-custody, it means a record made at the time. If you cannot specifically identify units, the default within that wallet is first in, first out.
Why it matters
Choosing high-basis lots first reduces gain this year; choosing lots held over a year converts short-term gain to long-term. Both are legitimate, but only with contemporaneous records. Identification reconstructed after the fact is the position auditors reject most often.
Example
You hold three lots of SOL bought at 20, 80, and 150 dollars. You sell one unit for 160 dollars. With specific identification of the 150 dollar lot, gain is 10 dollars. Under FIFO, gain is 140 dollars.
Related: HIFO, FIFO, cost basis.
