IRS Chief Counsel Memoranda: Cryptocurrency Donations Above $5,000 Need Qualified Appraisal and No Unrealized Cryptocurrency Loss Without Disposition
The IRS recently released two chief counsel memoranda addressing cryptocurrency donations and cryptocurrency tax losses. In CCM 202302012, the IRS stated that a taxpayer that donates cryptocurrency and seeks a charitable contribution deduction of more than $5,000, must obtain a qualified appraisal under section 170(f)(11)(C) to qualify for the deduction under section 170(a). In the second, CCM 202302011, the IRS stated that a taxpayer that owns cryptocurrency that has substantially declined in value has not sustained a cryptocurrency loss under section 165 due to worthlessness or abandonment of the cryptocurrency. While these conclusions may not be surprising, these written determinations provide a glimpse into the IRS’s thinking on the issues. The IRS likely issued these written determinations in advance of the kickoff of the individual tax filing season to inform similarly situated taxpayers how to treated unrealized cryptocurrency losses and substantiating cryptocurrency donations where the taxpayer intends to claim a deduction greater than $5,000.