Barter or not barter?


J

Jonathan Kamens

Suppose you send out a tweet to all your friends: "Need help
loading moving truck. Free pizza and beer for all volunteers.
Call me."

Five or six friends show up, help you load your truck, and
eat your pizza and drink your beer when the work is done.

Have you just engaged in a bartering transaction? Do you have
to report the FMV of your friends' labor as taxable income?
Do they have to report the FMV of the pizza and beer as
taxable income? Why or why not?
 
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J

JoeTaxpayer

Suppose you send out a tweet to all your friends: "Need help
loading moving truck. Free pizza and beer for all volunteers.
Call me."

Five or six friends show up, help you load your truck, and
eat your pizza and drink your beer when the work is done.

Have you just engaged in a bartering transaction? Do you have
to report the FMV of your friends' labor as taxable income?
Do they have to report the FMV of the pizza and beer as
taxable income? Why or why not?
http://tinyurl.com/jtp110919 is a clip from IRS pub 525. All the
examples given are a bit more professional than this, e.g. An accountant
doing the books of a painter who then paints his house. I'll admit this
is a gray area, and no matter my response, there can be a flurry of
"does this count as barter?" replies.
My 'no' to your scenario is based on two aspects of this. First, you are
not offering your work in exchange, food and drink doesn't pass the
smell test to be as barter items in this regard. Second, the tweeps
(friends on twitter) aren't movers. When I help a friend with anything,
it's common to be offered this very thing, food and drink, depending on
time of day.

I'd avoid using the term "common sense" in any IRS discussion, it's
burned me before. My gut says they are going after the barter clubs, esp
organized ones that are so extensive that plumbers are working for
people they don't know and are getting their teeth cleaned by hygienists
they'd never gone to before. There's the work-based transactions, and
goods-based ones. Yours is a one-off, and a low value one at that.
 
J

Jonathan Kamens

OK, so here's a related example...

The on-call schedule for a shift job is published. Joe is
assigned the week of Christmas but doesn't want to be on call
that week. Fred doesn't care all that much about working that
week, so he agrees to swap weeks. The two workers
half-jokingly "bargain" that Joe will buy Fred lunch to
"compensate" him for agreeing to the swap.

Does Fred need to report the cost of the meal as taxable
income, since he "bartered" it for the "service" of swapping
on-call weeks with Joe?
 
S

Stuart Bronstein

Jonathan said:
OK, so here's a related example...

The on-call schedule for a shift job is published. Joe is
assigned the week of Christmas but doesn't want to be on call
that week. Fred doesn't care all that much about working that
week, so he agrees to swap weeks. The two workers
half-jokingly "bargain" that Joe will buy Fred lunch to
"compensate" him for agreeing to the swap.

Does Fred need to report the cost of the meal as taxable
income, since he "bartered" it for the "service" of swapping
on-call weeks with Joe?
In both your examples technically there is bartering, and technically
there is taxable income. However in each case the income is de
minimis, so I wouldn't worry about it.

In your first example if the mover is in the business of moving and he
does it every week, he should report the value of the services he
received. But otherwise, I'd think the IRS wouldn't care because the
amounts involved are just too small to bother with.
 
J

JoeTaxpayer

OK, so here's a related example...

The on-call schedule for a shift job is published. Joe is
assigned the week of Christmas but doesn't want to be on call
that week. Fred doesn't care all that much about working that
week, so he agrees to swap weeks. The two workers
half-jokingly "bargain" that Joe will buy Fred lunch to
"compensate" him for agreeing to the swap.

Does Fred need to report the cost of the meal as taxable
income, since he "bartered" it for the "service" of swapping
on-call weeks with Joe?
Joe hasn't gained anything of tangible value here. He just bought Fred a
sandwich to be off the hook for that week. Is lunch above any de-minimus
amount, if such things apply?
I think for this topic, there's going to be 3 groups of examples. The
situations that are clearly bartering that should be reported, where
anyone would agree not doing so is wrong, and against the law.
The wide gray area of "most would probably not report, but you should,
especially if you plan to make a habit of this."
And last, the one-off situations where it wouldn't even occur to me that
it could be considered a barter that should be claimed.

Just saw Stu's response, I think he and I agree.

JoeTaxpayer
 
S

Stuart Bronstein

JoeTaxpayer said:
Joe hasn't gained anything of tangible value here. He just bought Fred
a sandwich to be off the hook for that week. Is lunch above any
de-minimus amount, if such things apply?
I think for this topic, there's going to be 3 groups of examples. The
situations that are clearly bartering that should be reported, where
anyone would agree not doing so is wrong, and against the law.
The wide gray area of "most would probably not report, but you should,
especially if you plan to make a habit of this."
And last, the one-off situations where it wouldn't even occur to me
that it could be considered a barter that should be claimed.

Just saw Stu's response, I think he and I agree.
Exactly. Very well put.
 
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R

removeps-groups

http://tinyurl.com/jtp110919is a clip from IRS pub 525. All the
examples given are a bit more professional than this, e.g. An accountant
doing the books of a painter who then paints his house. I'll admit this
is a gray area, and no matter my response, there can be a flurry of
"does this count as barter?" replies.
My 'no' to your scenario is based on two aspects of this. First, you are
not offering your work in exchange, food and drink doesn't pass the
smell test to be as barter items in this regard. Second, the tweeps
(friends on twitter) aren't movers. When I help a friend with anything,
it's common to be offered this very thing, food and drink, depending on
time of day.
Food and drink are certainly barter items. IRC 61 says it is taxable:

BEGIN QUOTE

Sec. 61. Gross income defined

(a) General definition
Except as otherwise provided in this subtitle, gross income
means
all income from whatever source derived, including (but not
limited
to) the following items:
(1) Compensation for services, including fees, commissions,
fringe benefits, and similar items;

END QUOTE

I don't see see anywhere about a de minimus amount.

But I think the food and drink is not taxable per IRC 125 on cafeteria
plans.

I'd avoid using the term "common sense" in any IRS discussion, it's
burned me before. My gut says they are going after the barter clubs, esp
organized ones that are so extensive that plumbers are working for
people they don't know and are getting their teeth cleaned by hygienists
they'd never gone to before. There's the work-based transactions, and
goods-based ones. Yours is a one-off, and a low value one at that.
I agree based on common sense you can forget about this whole thing,
and also that "common sense" is not a technically sound term to use.
 
S

Stuart A. Bronstein

Sec. 61. Gross income defined

(a) General definition
Except as otherwise provided in this subtitle, gross
income means all income from whatever source derived,
including (but not limited to the following items:
(1) Compensation for services, including fees,
commissions, fringe benefits, and similar items;

END QUOTE

I don't see see anywhere about a de minimus amount.
Smaller barter items are more like cross gifts than actual barter.
When I helped a friend move, I didn't do it expecting to be paid or
fed. They did that in appreciation. The value I got wasn't nearly
worth what I gave. On both sides it was a gift, not at all a
commercial transaction. That's where I'm coming from on this.
 
D

D. Stussy

If these people really were your friends, they'd probably help without a
promise of food, etc.... Therefore, although possibly meeting the letter
of the law, it's not really meeting the spirit of the law. Common sense
(is there any in the tax code?) says this is more like a gift, and thus not
taxable.
Food and drink are certainly barter items. IRC 61 says it is taxable:

BEGIN QUOTE

Sec. 61. Gross income defined

(a) General definition
Except as otherwise provided in this subtitle, gross income
means
all income from whatever source derived, including (but not
limited
to) the following items:
(1) Compensation for services, including fees, commissions,
fringe benefits, and similar items;

END QUOTE

I don't see see anywhere about a de minimus amount.

But I think the food and drink is not taxable per IRC 125 on cafeteria
plans.



I agree based on common sense you can forget about this whole thing,
and also that "common sense" is not a technically sound term to use.
I do agree that when the parties don't previously know each other or use a
third-party exchange, it definently meets the definition of bartering.
 
J

JoeTaxpayer

I do agree that when the parties don't previously know each other or use a
third-party exchange, it definitely meets the definition of bartering.
And in this day of facebook/twitter, etc, I can easily image a scenario
where a tweet goes out, 20 strangers show up, move a few boxes, grab a
beer, pizza, and leave. A flash-mob for moving or some other simple
task. As a kid, I knew what the phase "know each other" meant. Today, I
honestly don't. Do we know each other, D?
 
D

D. Stussy

JoeTaxpayer said:
And in this day of facebook/twitter, etc, I can easily image a scenario
where a tweet goes out, 20 strangers show up, move a few boxes, grab a
beer, pizza, and leave. A flash-mob for moving or some other simple
task. As a kid, I knew what the phase "know each other" meant. Today, I
honestly don't. Do we know each other, D?
NO. We have never met in person.
 
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A

Alan

Suppose you send out a tweet to all your friends: "Need help
loading moving truck. Free pizza and beer for all volunteers.
Call me."

Five or six friends show up, help you load your truck, and
eat your pizza and drink your beer when the work is done.

Have you just engaged in a bartering transaction? Do you have
to report the FMV of your friends' labor as taxable income?
Do they have to report the FMV of the pizza and beer as
taxable income? Why or why not?
I've been on vacation and am now catching up....

This is not a barter transaction. This is merely friends volunteering to
help another friend. The food provided is not taxable to the recipients
as it is provided by the employer of the volunteers for the employer's
convenience.
 

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