Crypto Gifts, Charitable Donations, and Inheritance

A crypto transfer can move substantial value without being a sale.

That does not mean basis disappears.

Three different systems

Gift: basis can carry over from the donor, with special dual-basis rules for loss property.

Charitable contribution: holding period, character, valuation, appraisal, substantiation, and deduction limits matter.

Inheritance: basis generally follows §1014 rather than ordinary gift carryover basis.

Gifts

If a donor bought ETH for $8,000 and gifts it when worth $25,000, the recipient generally starts with the donor's $8,000 basis for determining later gain, subject to the gift-basis rules.

If property has declined before the gift, dual basis can apply.

Example:

• donor basis: $30,000
• gift-date FMV: $20,000

A later sale for $35,000 generally produces $5,000 gain using donor basis.

A later sale for $15,000 generally produces $5,000 loss using gift-date value.

A sale between the two figures can produce neither gain nor loss.

When basis is determined by reference to donor basis, the donor's holding period can also matter.

Gift tax is separate

A genuine gift generally does not become ordinary income to the recipient merely because it is valuable.

But federal gift-tax reporting is a separate system. Annual exclusions, Form 709 requirements, and transfer-tax consequences should be checked for the relevant year.

Charitable contributions

Direct donation of appreciated investment property can differ materially from selling first and donating cash.

When qualifying appreciated property is a capital asset held more than one year and statutory requirements are satisfied, the deduction can generally be based on fair market value rather than adjusted basis, subject to limitations and exceptions.

Short-term or ordinary-income property can produce a different deduction.

Qualified appraisals

A digital asset can have visible exchange prices and still be subject to qualified-appraisal rules.

CCA 202302012 concluded for the cryptocurrency addressed there that the taxpayer could not use the publicly traded securities exception to avoid a qualified appraisal.

The CCA is nonprecedential.

Do not inflate it into:

“No digital asset could ever qualify for the publicly traded securities exception.”

Determine whether the particular contributed asset satisfies the statutory and regulatory exception.

For ordinary cryptocurrency that does not qualify as a security within the relevant tax definition, publicly visible exchange pricing alone should not be assumed to eliminate appraisal requirements.

For noncash contributions above applicable thresholds, Form 8283, appraisal, and substantiation rules can become central.

A charity acknowledgment and a qualified appraisal perform different functions.

Inherited crypto

IRC §1014 generally determines basis for property acquired from a decedent by reference to the estate-tax valuation framework.

If the decedent bought BTC for $15,000 and the relevant estate value is $70,000, a beneficiary with $70,000 §1014 basis who later sells for $75,000 generally has $5,000 of later gain.

Inherited property generally receives long-term holding-period treatment under the applicable rules.

Crypto also creates practical estate issues involving wallet access, ownership records, exchange accounts, valuation, and private keys.

Documentation

For gifts preserve donor basis, acquisition date, gift-date FMV, transfer date, and gift-tax records.

For charity preserve adjusted basis, acquisition date, holding period, FMV, charity eligibility, appraisal analysis, acknowledgment, and Form 8283 records.

For inheritance preserve estate valuation, ownership, applicable §1014 basis, valuation-date information, and access records.