IRS: Substantiation is Required for Charitable Donations of Crypto Assets

The IRS Office of Chief Counsel recently released a Chief Counsel Advice document advising that a charitable contribution deduction for a donation of digital assets without a qualified appraisal should be denied because the value of those assets exceeded $5,000. The taxpayer in this case donated cryptocurrency valued at $10,000. The $10,000 value was based on the value listed on the cryptocurrency exchange where the assets were purchased as of the date the donation was made. The taxpayer did partially complete Form 8283, Noncash Charitable Contributions, but did not obtain a qualified appraisal. The IRS did not agree with the taxpayer's rationale that she did not need an appraisal because the value of the digital assets was published and readily available. Under IRC Sec. 170(f)(11)(C), an appraisal is generally not required when the property has readily available value (including cash, publicly traded securities, etc.). The OCC noted that while cryptocurrency exchanges may publish valuation information, these assets do not meet the definition of a security. The IRS further found that a reasonable cause exception would not apply because the taxpayer did not attempt to obtain an appraisal as required in Form 8283. For more information on the tax treatment of cryptocurrency, visit Tax Facts Online. : Q 7722. Note: Q is updated.