What are the supported tax lot accounting methods in LUSID?

LUSID supports numerous tax lot accounting methods. See a full list.

By default, a holding in a transaction portfolio is not divided into tax lots. Instead, LUSID calculates an average cost from all transactions that contribute to an increase in that holding (that is, buys and short sells). This average cost is then used as a basis to calculate realised gains/losses for transactions that contribute to a decrease in the holding.

The default accounting method for a portfolio is therefore AverageCost. You have the option to set this explicitly when you create a portfolio. If you do not set the portfolio’s accountingMethod field explicitly, then LUSID sets it to Default automatically, which has the same effect as AverageCost.

For a detailed example, examine this Jupyter Notebook.

Comparing the AverageCost and FirstInFirstOut accounting methods

Imagine we have a portfolio containing a single holding in an Equity instrument generated from the following four transactions:

Date	Transaction type	Units	Price	Cost/proceeds
Mon 2 Dec 2024	Buy	10	10	100
Tues 3 Dec 2024	Buy	10	11	110
Wed 4 Dec 2024	Buy	10	12	120
Thur 5 Dec 2024	Sell	15	13	195

`AverageCost` accounting method	`FirstInFirstOut` accounting method
Holdings on Wed 4 Dec 2024 (before the Sell transaction)
A single holding with 30 units is generated. The average cost is £330 / 30 = £11 per unit:	The holding is divided into three tax lots when By tax lots is enabled, reflecting the different purchase dates and prices:
Holdings on Thur 4 Dec 2024 (after the Sell transaction)
15 units are liquidated at £11 per unit:	The first tax lot of 10 units (the oldest) is liquidated at £10 per unit, and 5 units of the second tax lot at £11 per unit:
Realised gain/loss on the Sell transaction
The realised gain is £195 (proceeds) - £165 (cost) = £30:	The realised gain is £40: From the first tax lot: £130 (proceeds) - £100 (cost) = £30 From the second tax lot: £65 (proceeds) - £55 (cost) = £10

Supported tax lot accounting methods

Method	Explanation
`AverageCost`	This is the default. A holding is not divided into tax lots. Instead, LUSID calculates an average cost from all transactions that contribute to an increase in that holding.
`FirstInFirstOut`	The oldest tax lots are liquidated first.
`LastInFirstOut`	The newest tax lots are liquidated first.
`HighestCostFirst` `HighestCostFirstPortfolioCurrency`	Tax lots with the highest cost (in either local or portfolio currency) are liquidated first.
`LowestCostFirst` `LowestCostFirstPortfolioCurrency`	Tax lots with the lowest cost (in either local or portfolio currency) are liquidated first.
`IntraDayThenFirstInFirstOut`	Tax lots opened on the same day are liquidated first (oldest within the day first), then first in first out (that is, the oldest tax lots are liquidated first).
`LongTermHighestCostFirst` `LongTermHighestCostFirstPortfolioCurrency`	Long term lots are those held for 365 days or more; short term lots are those held for less than 365 days. Long term tax lots with the highest cost (in either local or portfolio currency) are liquidated first. Once exhausted, short term lots with the highest cost (in either local or portfolio currency) are liquidated first.
`MaximumLossMinimumGain` `MaximumLossMinimumGainPortfolioCurrency`	Tax lots are liquidated in the following hierarchy: • Short term loss • Long term loss • Short term no gain/loss • Long term no gain/loss • Long term gain • Short term gain Within these groups, highest cost first applies, and then first in first out. Assessed using either local or portfolio currency.
`ProRateByUnits`	Units are removed from tax lots on a proportional basis, assessed on the tax lot units portion of total units.
`ProRateByCost` `ProRateByCostPortfolioCurrency`	Units are removed from tax lots on a proportional basis, assessed on the tax lot cost portion of total cost (in either local or portfolio currency).