FIFO (First In, First Out)

FIFO — First In, First Out — is a cost basis accounting method where the shares you purchased first are assumed to be sold or settled first. It's the IRS default method and the one used by predictiontaxes.com for all calculations.

Why FIFO matters

If you bought into the same prediction market multiple times at different prices, FIFO determines which purchase price is used to calculate your gain or loss when shares settle.

Example

You make two purchases of YES shares on "Will it snow in NYC on Christmas?":

• October: Buy 100 shares at $0.25 (cost: $25)
• December: Buy 100 shares at $0.70 (cost: $70)

The market resolves YES. Under FIFO:

• The October shares (first in) settle first: $100 proceeds − $25 cost = $75 gain
• The December shares settle second: $100 proceeds − $70 cost = $30 gain

Total gain: $105. If LIFO (last in, first out) were used instead, the December shares would settle first, producing a $30 gain, then the October shares with a $75 gain — same total but different per-lot calculations.

When FIFO matters more

FIFO has a bigger impact when you sell partial positions before settlement. If you bought 200 shares but sell 100 before the market resolves, FIFO determines which 100 shares you "sold" (the earlier, cheaper ones), affecting your reported gain.

Other methods

LIFO (last in, first out) and specific identification are alternative methods, but they require explicit election with the IRS. For simplicity and compliance, FIFO is the safest default.