New IRS Guidance: Qualified Appraisal Requirements for Cryptocurrency Donations

What is the New Qualified Appraisal Requirement for Charitable Contributions of Cryptocurrency?

On January 13, 2023, the Internal Revenue Service (“IRS”) released a memorandum (CCA 202302012[1]). This memorandum concludes that if a taxpayer donates cryptocurrency for which a charitable contribution deduction of more than $5,000 is claimed, a qualified appraisal is required.

Additionally, a taxpayer cannot determine the value of the donated cryptocurrency based on the value reported by a cryptocurrency exchange on which the cryptocurrency is traded rather than by obtaining a qualified appraisal, and the taxpayer will not be allowed the charitable contribution deduction under section 170(a).

What Does This Mean for You?

To claim a charitable contribution deduction, a taxpayer must satisfy certain substantiation requirements. In general, for contributions of property for which a deduction of more than $5,000 is claimed, the taxpayer must obtain a qualified appraisal of such property for the taxable year in which the contribution is claimed and provide such information regarding the property and the appraisal.

Section 170(f)(11)(E)(i) provides that the term “qualified appraisal” means an appraisal that is (1) treated as a qualified appraisal under regulations, and (2) conducted by a qualified appraiser in accordance with generally accepted appraisal standards.

Section 170(f)(11)(E)(ii) provides that the term “qualified appraiser” means an individual who (1) has earned an appraisal designation from a recognized professional appraiser organization or has otherwise met minimum education and experience requirements set forth in regulations prescribed by the Secretary, (2) regularly performs appraisals for which the individual receives compensation, and (3) meets such other requirements as may be prescribed by the regulations.

As such, if you are a taxpayer or entity who is looking to make a charitable contribution of cryptocurrency, it is imperative that you find a qualified appraiser to perform a qualified appraisal.

Our dedicated, skilled professionals collaborate with international and domestic token issuers, digital asset exchanges, including decentralized finance platforms, venture capital, funds, miners, media, blockchain and enterprise platforms, and other leaders. This allows us to find solutions for your unique accounting needs. If you have questions or need assistance regarding the valuation of your digital asset holdings or contributions please contact Centri to learn how we can help.

[1] https://www.irs.gov/pub/irs-wd/202302012.pdf

About Centri Business Consulting, LLC

Centri Business Consulting provides the highest quality advisory consulting services to its clients by being reliable and responsive to their needs. Centri provides companies with the expertise they need to meet their reporting demands. Centri specializes in financial reporting, internal controls, technical accounting research, valuation, and CFO and HR advisory services for companies of various sizes and industries. From complex technical accounting transactions to monthly financial reporting, our professionals can offer any organization the specialized expertise and multilayered skillsets to ensure the project is completed timely and accurately.

For more information, please visit www.CentriConsulting.com