AboutCarole Dunton Expertise Preparation of individual income tax returns including social security, pensions, lump sum distributions, sale of personal residence, stock and mutual fund sales, distributions from individual retirement accounts, moving expenses and itemized deductions.
General knowledge of schedule C for small sole proprietorships.
No experience in corporate, estate, partnership or large business returns.
Experience 8 years as tax preparer for major national firm.
I just want to make sure I understand. So if I use a database to keep track of each partner's construction work hours and their Labor Barter Credit dollar pay associated with them in order to know how many houses were built by each partner, the IRS doesn't recognize the partner's Labor Barter Credit dollars I have on my database as income? So there is no need for the partners to file their Labor Barter Credit dollars as personal income, correct? As far as you know, will the IRS likely always exclude Labor Barter Credit as income? Is there an IRS document number you can refer me to that explains the IRS's position on this? Is there a specific IRS document number you can refer me to that explains the IRS's position on Bartering?
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Followup To
Question -
Hi Carole,
I have an IRS question about Barter. I understand that if I build houses with my friends and sell them we each incur Capital Gains which will raise our personal income tax. However, if none of us were paid any money for our house construction labor, couldn't we assign a fair price for what our construction labor was worth when constructing those houses to come up with a Barter value and then deduct that Barter value from our Capital Gains?
Answer -
Hi Stewart,
The value of your time/labor would not be a part of your basis in the property.
Regards,
Carole
Answer Hi,
Here is what I have found about barter.
"Barter, or the swapping of goods and services, results in gross income to each party to the swap to the extent of the fair market value of the goods or services received. The dollar value of barter "credits" received by members of barter clubs for goods or services rendered to other members is taxable." Source RIA Federal Tax Handbook, Paragraph 1207.
"Barter exchanges through which at least 100 exchanges of property or services are made during the calendar year must report each exchange on Form 1099-B. (Code Sec. 6045)" This may not apply to you if you don't have that many exchanges.
For more information go to the IRS website www.irs.gov and in the 'Search' box put barter. There are several good sources of info in the list this brings up.
