Crypto---Not Like Stocks
As we move into the world of cryptocurrencies, they have begun to be used as vehicles to make charitable gifts. I think most would agree that anything we can do to increase the opportunities for people to give is a good thing. But we finally have a definitive answer from the IRS regarding how to value these crypto gifts. And it's not what most of us thought.
The IRS just recently announced that the valuation of cryptocurrency gifts will look more like paintings, land, and other non-monetary vehicles. At least for my part, I thought that, because there were public trading markets for valuation, crypto would be evaluated much like stocks: the average of the high and low of the day when the gift was made. Not so fast, says the Internal Revenue Service.
If a crypto gift is given and it's over $5,000, it will be classified under section 170 A of the Internal Revenue Code. This section mandates a qualified appraiser to give some form of valuation for the gift. There are no exceptions for cryptocurrencies that are traded on open markets. This means more work on the part of the nonprofit and donor to figure out “value” for tax purposes.
Here’s my question…who/what is a qualified appraiser for cryptocurrency?
I'm not going to try to argue with the IRS considering that they don't recognize cryptocurrency as a publicly traded unit. That's what actually kicks this over into the need for an appraisal. But I do question what this will do for nonprofits who want to seek crypto gifts. This makes the transaction more complicated with additional paperwork, additional notification, and worry about post-gift review if not done correctly. It may also add to auditing costs.
There are multiple nonprofit advocacy groups, as well as those that are affiliated with cryptocurrencies, that have already begun a petitioning process to the IRS to adjust this policy to something similar to how we evaluate stock gifts. But since the government prints the money, I'm not sure they're going to be all that open to formally identifying cryptocurrencies on the equivalent level of the US dollar.
Stay tuned. My guess is this gets more complicated than less.
