Return to News Jan 18, 2023

TO: Interested Parties

FROM: Ezra Reese, Emma Olson Sharkey, and Mary Samson, Elias Law Group LLP

RE: IRS Requires Qualified Appraisal to Deduct Crypto Donations

On January 10, the Internal Revenue Service issued guidance that requires taxpayers who make charitable contributions of cryptocurrency to receive a qualified appraisal to qualify for a charitable deduction.1 Taxpayers may not determine the value of the donated cryptocurrency based on the value reported by a cryptocurrency exchange on which the cryptocurrency is traded. Significantly, if taxpayers fail to obtain a qualified appraisal before their taxes are due, they will not be able to deduct the contribution.




Section 170 of the Internal Revenue Code allows taxpayers to deduct charitable contributions. As a general rule, taxpayers are required to obtain a “qualified appraisal” when claiming a deduction for contributions of property of more than $5,000, including digital assets like cryptocurrency.2 A “qualified appraisal” is prepared by a qualified appraiser in accordance with the Uniform Standards of Professional Appraisal Practice and Treasury Regulations. The appraisal must be obtained no earlier than 60 days before the contribution date but before the taxpayer’s taxes are due.


Under Treasury Regulations, a qualified appraisal is not required for donations of certain readily valued property, including cash, specific types of inventory, stocks traded on national exchanges, and other specified property.3 Moreover, a taxpayer may rely the “reasonable cause” exception – and still deduct the contribution – if they can show that they exercised ordinary business care in failing to obtain a qualified appraisal. Prior to the IRS’s most recent guidance, many thought the value of donated cryptocurrency could be reasonably ascertained based on the reported value on the exchange where the currency is traded and, therefore, taxpayers could rely on the reasonable cause exception.


However, the IRS’s recent guidance confirms that a taxpayer must obtain a qualified appraisal to deduct donated cryptocurrency when the claimed deduction is more than $5,000. In reaching this conclusion, the IRS determined that no exception to the “qualified appraisal” requirement applies – including a “reasonable cause” exception – and, therefore, the use of a value reported on a cryptocurrency exchange does not satisfy the qualified appraisal requirement. 


1 IRS, Chief Counsel Advice Mem. 202302012 (Jan. 10, 2023). Although this memorandum is not binding precedent, the guidance is instructive for how the IRS may treat similar fact patterns.

2 I.R.C. § 170(f)(11)(C).

3 Treas. Reg. § 1.170A-16(d)(2)(i).