Qualified Appraisal Required to Deduct Charitable Contribution of Cryptocurrency

Earlier this month, the Internal Revenue Service (IRS) released a memorandum (CCA 202302012) concluding that a qualified appraisal is required when a taxpayer claims a charitable contribution deduction exceeding $5,000 for donated cryptocurrency. The memorandum is relevant to any taxpayer who has donated (or plans to donate) cryptocurrency, if they also intend to claim a charitable deduction.

Cryptocurrency is not exempt from the qualified appraisal requirement because the Internal Revenue Code (section 170(f)(11)(A)(ii)(I)) and Treasury regulations specifically identify readily valued property and do not include cryptocurrency in that definition. Also, a taxpayer’s reliance on the cryptocurrency exchange’s value of the donated cryptocurrency does not meet the reasonable cause exception for a failure to obtain an appraisal.

If you have any questions related to section 170 substantiation requirements associated with charitable contributions, please reach out to your accounting professional.