As part of year-end tax planning, many taxpayers consider making charitable contributions of cash or noncash property. If certain requirements are met, a charitable contribution of noncash property can provide the donor an opportunity to receive a fair market value tax deduction without being taxed on the built-in gain of the contributed assets. Over the past few years, more taxpayers have been considering donating virtual currencies and other digital assets. However, navigating the tax treatment of digital asset contributions can be tricky.
Digital assets generally are more volatile than other types of appreciated assets, and significant uncertainty exists about how the charitable deduction rules apply to digital assets. IRS guidance on these transactions has been limited to virtual currency, which is treated as property, but even that guidance has left numerous questions unanswered.