Snowman's Jizz Biz Law Blog

[DSLewis]

Ginko23 posted a question regarding bartering many months ago, which I just read. In the example given, I would think that the two taxpayers entered into a joint venture together. They pooled their resources and talent, created a product, and each independently will exploit that product in their separate businesses. I think the $1,500 "value" is arbitrary and not really an indication of what is going on here, as both parties retain an interest in the product. I would think that each party should deduct the costs the incurred and recognize whatever income they receive from exploitation of the product, when they receive it. A true example of barter would be if an actress agrees to provide the same services in exchange for a $1,200 Coach bag without retaining any rights to the product. The the other party happened to have bought the Coach bag on ebay for $400. The actress would have income of $1,200 and could deduct her out of pocket expenses against that, and the other party would deduct the $400 cost of the bag and his other out-of-pocket expenses. Just my opinion.