On January 22, 2021, Chris Moran was quoted in Law360 on donations of virtual currencies to charities and nonprofit organizations. According to the article, a relatively small number of organizations, including some high-profile entities, accept donations of virtual currency now. Rising values may help grow a new donor class for charities to reach out to, and donations of virtual currency can deliver significant tax benefits. However, there are challenges for donors and charities, including a requirement for a qualified appraisal of donations.
Current IRS virtual currency guidance includes a 2014 notice treating it as property for tax purposes. The agency also said in a December 2019 update to frequently asked questions that charities must report virtual currency donations to the IRS. The IRS also issued final regulations in 2018 regarding charitable contributions that require a qualified appraisal for donated property when a charitable deduction of more than $5,000 is claimed.
Moran told Law360 that guidance exempting donations of exchange-traded virtual currency from the appraisal requirement would encourage donations. There's a need for guidance on the appraisal issue, and the problem is there's no guidance now defining virtual currency as readily valued property, he said.
"IRS guidance such as a notice stating that cryptocurrency traded on a recognized exchange is treated as 'readily valued property' for purposes of Section 170(f)(11)(A)(ii)(I) would solve the issue," he said, referring to a section of the Internal Revenue Code.