In a Chief Counsel Memorandum, the Internal Revenue Service is now requiring an appraisal for all crypto donations that exceed $5,000. Please take a moment, and think about the ridiculousness of this new rule.
Stock donations have always been handled in a recognized and specific manner. You take the date that an individual stock was donated, determine the low and high trading price of the stock that day, divide through for an average price, and bingo…there’s the accepted price per share for donation purposes.
Why can’t we follow the same process for a crypto asset? I have no idea.
Given the recent bankruptcies of crypto exchange companies like FTX, Blockfi, Celsius, and Voyager Digital, how would we even begin to get the backup necessary for an appraisal? Once again, I have no idea, but a rule is a rule.
Let me leave you with this.
Let’s set up a scenario. I’m doing a return for someone who actually donated $5,000 in crypto assets to the charity of their choice.
I call the client and tell them they need a certified appraisal in order to take the charitable deduction. Who would they call to get an appraisal for something like this?
Welcome to taxation and have a ridiculous day.
About 25 years ago, I had a similar situation on an estate tax return. The client had purchased eight lots and a vacation home on a lake in Southern Wisconsin. Over time, the lake had shifted and two of the lots were under water.
We actually had to get an appraisal on underwater lots for the estate tax return. It cost more to do the appraisal, than the lots were worth in the first place.
Rules like the one for crypto do nothing but make people not want to donate money to charities in the first place.
We’re all going to get through this. Let’s get through it together.
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