A tax lot is a group of units of one asset acquired in a single transaction, recorded with its acquisition date, quantity and cost. Each purchase, reward or other acquisition creates a new lot, and a sale is matched against one or more lots to determine the gain or loss and the holding period.
A lot records four things: what was acquired, how many units, on what date and at what cost. Two purchases of the same token on different days are two lots even if the price was identical, because their holding periods differ. A lot can be consumed in part. If 3 ETH were bought together and 1 ETH is sold, the remaining 2 ETH keep the original date and two thirds of the original cost.
Lots are created by more than purchases. Staking rewards, airdrops and tokens received as payment each create a lot dated when the units were received, with a cost basis equal to the amount recognised as income. A swap of one token for another closes lots of the token given and opens a lot of the token received. Transferring units between wallets the holder controls does not create or close a lot; it moves the lot, with its date and cost intact, to the new wallet.
Which lot a sale consumes is decided by an ordering rule or by specific identification. Lots are the unit that every such rule operates on. Without lots there is nothing for FIFO to order and nothing for an identification to point at.
A holder buys 0.5 BTC on 3 February 2024, 0.25 BTC on 19 July 2024 and receives 0.01 BTC as a reward on 30 November 2024. That is three lots. A sale of 0.6 BTC on 10 March 2025 under FIFO consumes the whole February lot and 0.1 BTC of the July lot, producing two Form 8949 lines with different dates acquired. The remaining 0.15 BTC of the July lot and the reward lot stay on the books.
Form 8949 reports each disposition with the date acquired, the date sold, the proceeds and the basis. Each line is a lot or a portion of one. A sale that consumes two lots produces two lines, and the lot decides whether each line is short-term or long-term. Without lot records the acquisition date and basis on the form are estimates.
Under Regulations section 1.1012-1(j), for units acquired or disposed of on or after January 1, 2025, lots are tracked within the wallet or account that holds them. A sale from a wallet is matched to lots in that wallet, by FIFO unless an adequate identification is made. A lot's basis has to be established from the taxpayer's records. A broker's Form 1099-DA carries lot data only for units the broker has acquisition information for; lots transferred in from elsewhere may arrive at the broker with no cost recorded.
Units bought in 2021 are moved from an exchange to a hardware wallet in 2024. The wallet import creates a new lot dated on the transfer with a cost of zero, or with the market value on the transfer date, because the software did not link the two sides of the transfer. The 2021 lot is lost. A 2025 sale from the hardware wallet reports the wrong date acquired, the wrong basis and the wrong holding period.
Read our Universal vs Wallet-Based Cost Tracking
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