In a cryptocurrency memo (CCA 202302012) launched on January 10, 2023, the Workplace of the Chief Counsel supplies two vital reminders for each donors and charities concerning certified appraisal guidelines governing cryptocurrency contributions.
A certified appraisal is required for donations of cryptocurrency for which a charitable deduction of greater than $5,000 is claimed below part 170(a). As outlined in part 170(f)(11)(E)(ii), a “certified appraiser” is a person who (1) has earned an appraisal designation from a acknowledged skilled appraiser group or has in any other case met minimal schooling and expertise necessities set forth in laws prescribed by the Secretary, (2) often performs value determinations for which the person receives compensation, and (3) meets such different necessities as could also be prescribed by the Secretary in laws or different steerage.
As well as, though cryptocurrency belongings are traded on public exchanges and have simply referenced truthful market values, the appraisal requirement stays in impact with out exception.
Sometimes, a certified appraisal just isn’t required for donations of sure readily-valued property particularly set forth within the Tax Code and laws, particularly: money, inventory in commerce, stock, property primarily held on the market to prospects within the abnormal course of enterprise, publicly traded securities, mental property, and sure automobiles. Nevertheless, the IRS doesn’t at the moment outline cryptocurrency as a publicly traded safety. Subsequently, no exception to the final certified appraisal necessities of part 170(f)(11) is accessible.
The expressed results of this memo is the disallowance of the taxpayer’s charitable contribution as a result of incomplete documentation on the Kind 8283 — a results of no appraisal being carried out. In Pankratz v. Commissioner, the tax courtroom quipped in regards to the Kind 8283: “[W]e assume that 4 mentions of ‘appraisal’, ‘appraiser’, or ‘appraised’ on one web page of 1 type is fairly good discover that substantial noncash donations have to be backed up by an appraisal.”
It’s fairly clear that tax courts and the Chief Counsel’s workplace take the substantiation necessities for giant donations critically.
Notice that there are advocacy teams petitioning the IRS to vary its guidelines on this house, as a way to permit cryptocurrency to be handled as a publicly traded asset. Till such time because the IRS accepts such arguments, donors with vital cryptocurrency holdings are suggested to discover a certified appraiser with related expertise who can log out on their donation’s claimed worth.
For added info concerning Kind 8283 and appraisal necessities, contact Aaron M. Fox at aaron.fox@marcumllp.com, or your Marcum non-profit tax skilled.