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  • Writer's pictureKevin Leahy

Givzey Guidance: What Do I Do About a Cryptocurrency Gift?


Givzey Guidance: What Do I Do About a Cryptocurrency (Virtual Currency) Gift?
Givzey Guidance: What Do I Do About a Cryptocurrency (Virtual Currency) Gift?

Question: What Do I Do About a Cryptocurrency Gift?

Question: We have a donor who would like to make a gift using virtual currency. Should we accept it? If so, how should we process and value the gift?

Answer:

Yes, you certainly should accept a cryptocurrency gift, or virtual currency gift if you receive and process the gift following your Gift Acceptance Policy and IRS Rules and Regulations. The IRS uses the term “virtual currency,” which may also be called digital currency or crypto currency.


Let’s start with your options for receiving the gift.


Third Party Processor Option:

Most organizations are not set up to handle virtual currency gifts directly, much like most organizations don’t handle stock transactions themselves.


You can use a third-party processor (TPP) that will sell the virtual currency donation for you and settle in cash with you, usually the next day. Some TPPs include bitpay, The Giving Block, and Engiven.


Like options for Apple PayPal, etc. on your website, you would need to add an option for gifts of virtual currency for the TPP that you choose.


The IRS treats virtual currency as property, not cash, for Federal income tax purposes. This distinction is critical because gifts of property have additional filing requirements specifically covered in IRS Forms 8283 and 8282 based on the amount of the deduction. If you choose to use a TPP, make sure that they handle the IRS paperwork on your behalf including Forms 8283 and 8282 and an appraisal if required.


DAF Company Option:

Some organizations prefer to direct the cryptocurrency donor to a donor advised fund

(DAF) company such as Schwab or Fidelity Charitable. The DAF company handles all the IRS forms and appraisals required. Your organization receives a check from the DAF company just as with other DAF gifts. If you choose the DAF company option, they handle all the IRS paperwork.


Valuing Virtual Currency / Cryptocurrency Gifts:

The value of the gift comes down to when a donor relinquishes control, which varies depending on the method of delivery.



Gift Documentation Resources:


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