The Internal Revenue Service recently updated its guidance on virtual currency transactions, adding questions and answers to its website FAQ page about how donors and recipient organizations should deal with charitable donations of virtual currency.
The additional guidance was first reported Jan. 1 on the Current Federal Tax Developments website.
In December, the IRS addressed a charity’s responsibilities upon receiving virtual currency as a contribution in questions 35 and 36.
First, what are the nonprofit organization’s donor acknowledgment responsibilities?
The IRS said a charity can assist the donor by providing written acknowledgment immediately upon receipt of the contribution that the donor must obtain if he or she claims a deduction of $250 or more for the virtual currency donation.
It said the charity is generally required to sign the donor’s Form 8283, Noncash Charitable Contributions, which acknowledges receipt of charitable deduction property, if the donor is claiming $5,000 or more as a deduction and if he or she presents Form 8283 to the charity for signature to substantiate the tax deduction.
The IRS notes that the charity’s signature does not represent agreement with the appraised value of the contribution, but only acknowledgement of receipt of the property described in the form on the date specified and that the donee understands the information reporting requirement imposed by section 6050L on dispositions of the donated property.