Crypto donations now require a rating

More Complex Cryptocurrency Donations

Receiving deductions for cryptocurrency donations and charitable donations has become more complex and costly as a result of the new IRS announcement. If Taxpayer A donated cryptocurrency that is claimed to be tax deductible for charitable contributions greater than $5,000, to qualify for the deduction under Section 170(a), Section 170(f)(11)(C ) is required. The requirements that must be met for this evaluation are costly. Details of what such an assessment must contain and who can provide it are described below. Takeaways can be very costly to obtain a qualifying valuation, so it may not be practical to make a cryptocurrency donation unless the value of the donation is significant compared to the costs incurred. It means that there is

facts of the case

What happened in this case? A taxpayer purchased units of cryptocurrency for personal investment purposes. She earned cryptocurrency units by trading on cryptocurrency exchanges. She has since donated all units of her cryptocurrency to eligible charities. On her federal income tax return for the year of her giving, she completed Form 8283 and attached it to her tax return to claim a charitable donation deduction of $10,000, the value of the virtual currency she donated. The “claimed” (IRS term!) $10,000 deduction was based on the value listed on the cryptocurrency exchange where the particular cryptocurrency traded at the time of the donation. She was not eligible for the donation. The taxpayer argued that no valuation was necessary because the cryptocurrencies involved had easily verifiable values ​​based on the values ​​published by cryptocurrency exchanges. The IRS disagreed.

Cryptocurrencies are not like stocks

A qualified appraisal is not required for the donation of certain readily valued assets specifically provided for in the Code and Regulations. Intellectual Property, and Certain Vehicles. Cryptocurrencies do not fall under any of the items listed and do not meet the definition of a “securities” for these purposes. You might say crypto didn’t exist when these rules were formulated, but that didn’t sway the IRS.

What is a qualified appraisal

“Qualified appraisal” is a very specifically defined term, and you should hire an appraiser who is familiar with the requirements for appraisals for tax purposes. If the rating obtained does not meet all requirements, the rating will not be counted.

Assessments must be prepared by “qualified assessors” in accordance with the content and principles of the Uniform Standards of Professional Assessment Practice developed by the Assessment Standards Committee of the Assessment Foundation. You must also meet the relevant requirements of Rule Sections 1.170A-17(a) and (b). The appraisal must be signed and dated by a qualified appraiser 60 days prior to the date you donate the property. The valuation must be received by the return due date (including extensions) to first claim the property deduction. See Rule Section 1.170A-17(a)(4), (a)(8).

What is a Certified Appraiser?

In addition, there are many conditions that must be cleared in order to become an appraiser. A person with only expertise in the crypto space would probably not be qualified. Individual. An individual either: has attained the designation of an accredited appraiser from a recognized professional body of appraisers for demonstrating competence in valuing the type of property being valued; have met the minimum educational requirements of and have at least two years of experience in evaluating the type of property being assessed. To meet the minimum education requirements, individuals must have successfully completed professional or college-level coursework evaluating property types, and education must come from . Offers educational programs on a regular basis or to employers as part of employee apprenticeships or educational programs similar to professional or university level courses. Individuals prepare assessments on a regular basis and are paid for them. An appraiser declares in a certificate that he/she is qualified to appraise the type of property being valued due to his or her experience and education. The appraiser will specify in the certificate the appraiser’s education and experience in appraising the type of property being valued. Additionally, the appraiser must complete Part IV of Form 8283. See Section 170(f)(11)(E) and Rule Section 1.170A-16(d)(4) for more information.

Conclusion

This IRS position was announced in Lead Counsel Memorandum No.: 202302012 Release Date: January 13, 2023. Private letter rulings and lead attorney memorandums cannot be cited as precedents, but they usually provide insight into her IRS positions on specific issues. Therefore, those who make cryptocurrency donations who wish to keep their deductions should follow the suggestion to undergo a formal evaluation.