Generally, IRC Sec. 170(f) requires a taxpayer to satisfy certain substantiation requirements to claim a charitable contribution deduction. Recently, the IRS disallowed a taxpayer’s charitable contribution deduction for a donation of more than $5,000 in cryptocurrency because she failed to obtain a qualified appraisal of the donated property.
The taxpayer’s reliance on the cryptocurrency exchange’s value of the donated cryptocurrency did not meet the reasonable cause exception for a failure to obtain an appraisal. According to the Chief Counsel, the taxpayer’s cryptocurrency donation required a qualified appraisal under the general rules because the taxpayer donated property with a value of more than $5,000. Also, the donated property wasn’t exempt from the qualified appraisal requirement because it wasn’t one of the types of property listed as exempt in the regulations; therefore, the taxpayer was required to have a qualified appraisal of the property.
If you hold Cryptocurrency and have questions related to its taxation, valuation, or donation, please contact your ShindelRock tax professional.