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property valued at over $500, donors organizations report noncash contribu- requirements for a stock sale to qualify
must also complete and include with tions on line 1g of Part VIII, Statement for the exclusion, see Nitti, “Qualified
their tax return Form 8283, Noncash of Revenue, and line 14 of Part X, Bal- Small Business Stock Gets More At-
Charitable Contributions. ance Sheet, filed as part of the organiza- tractive,” 49 The Tax Adviser 734 (No-
Qualified appraisal: If the donor tion’s Form 990, Return of Organization vember 2018).
claims a contribution deduction greater Exempt From Income Tax. A recipient Sec. 1202 has been modified through
than $5,000, Sec. 170(f)(11) requires organization must also complete and the years. For stock acquired after Sept.
a qualified appraisal of the donated include with its tax return Schedule M, 27, 2010, and held more than five years,
property to be obtained and attached to Noncash Contributions, which breaks out the exclusion amount was raised to
the donor’s tax return. There are several the various types of donated property re- 100%, but the provision was temporary.
specific requirements for a “qualified ceived and reports the number of Forms In 2015, when the 100% exclusion was
appraisal” and a “qualified appraiser” 8283 received by the organization during made permanent, the incentives of the
under the Treasury regulations (see Regs. the tax year for which the organization provision rose to a level that investors
Sec. 1.170A-17(a)(2)). These include completed Part V, Donee Acknowledg- started taking it into consideration in
the requirement that the appraisal be ment. If a recipient organization sells the planning. The planning increased again
prepared by a qualified appraiser in donated property within three years of in 2018 when the corporate tax rate was
accordance with generally accepted ap- receipt, the organization must file Form reduced to 21%, making C corporation
praisal standards that meet the substance 8282, Donee Information Return, upon stock more attractive.
and principles of the Uniform Standards the disposition of the donated assets and With the recent boom in initial
of Professional Appraisal Practice. The provide a copy of the completed form to public offerings and private-equity
qualified appraisal must be signed by the original donor. acquisitions, which often include early
both the qualified appraiser and the investors and early employees seeing
recipient charitable organization. The New opportunities multimillion-dollar gains on the sale
recipient organization’s signature on a Given the increasing popularity and of their stock, a new dilemma has been
qualified appraisal represents acknowl- prevalence of cryptoassets, it is impera- created for tax practitioners. How do
edgment of receipt of the donated asset tive for taxpayers and tax professionals you obtain the information needed to
on the specified date and that the orga- alike to stay current on the tax regula- determine whether a client’s stock is
nization understands the information- tions that govern cryptoasset transac- eligible for the Sec. 1202 exclusion?
reporting requirements imposed on tions and donations. For charitable Shareholders who are not founders of
dispositions of the donated property. organizations, cryptoassets can provide the company may not have access to all
The signature does not represent the significant new sources of funding. of the information needed to determine
organization’s agreement with the ap- For donors, cryptoasset donations can whether their stock sale qualifies for the
praised value of the property. provide substantial tax savings through Sec. 1202 exclusion, and they and their
Publicly traded stocks are generally optimizing deductions. Careful consid- tax return preparers are finding that
exempt from these qualified appraisal eration is needed, however, of the tax some companies are not willing to pro-
requirements. The current IRS guidance ramifications of donating this newest vide the necessary information.
does not specifically provide a similar class of assets. Under Sec. 1202(d)(1)(C), corpora-
exception for cryptoassets, even though From Jennifer Galstad-Lee, CPA, tions must agree to submit reports as re-
values of many cryptoassets are readily J.D., and Patrick Crosby, CPA, MBA, quired under the regulations, but to date,
available on public exchanges, and GRF CPAs & Advisors, Bethesda, Md. no such regulations have been issued.
crypto transactions are usually trans- Some requirements of Sec. 1202 should
parent and open on a blockchain. For be easily documented by the shareholder,
NFTs, specific appraisal requirements Gains & Losses such as the date of acquisition, original
set out in the current regulations would issuance for money or property, or
likely be difficult to meet. Tax practitioner issues whether the stock was received as com-
related to Sec. 1202 pensation. Other requirements of Sec.
Reporting requirements for exclusion reporting 1202, such as whether the average gross
recipient charities Sec. 1202 was introduced into the Code assets of the corporation did not exceed
The charitable organization receiv- in 1993, but until recent years, the tax $50 million on the date of issuance of
ing a donation of cryptoassets has benefits were relatively small. For more the stock, may or may not be known
reporting requirements, too. Recipient on the history of Sec. 1202 and the to the early investors and employees.

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