Sorry for asking what feels like a common question, but I can't find a straight answer to this question even though I've done a good bit of Googling on this topic.
Last year my wife ran a website which had both sidebar advertisers and paid review articles of goods and services. With some of these articles, she would be given a "free" service and in exchange she'd right an article reviewing her experience or give the company a "free" advertisement on her side or leader bar.
From all accounts that I've read, these transactions are considered barter transactions, the received goods and services should be counted as "income" and are thus, taxable. However, since she bartered the exchange shouldn't there also be an associated "expense" of giving the customer an article or advertisement on the site? Articles and sidebars aren't free.
For example, if she received a free meal from a restaurant valued at $50, but wrote an article for which she would have typically charged $50, she may have received $50 in bartered goods, but shouldn't she some how account the provision of writing the article as a $50 expense? She doesn't write articles for free, so she's out of $50 in her pocket. If she was to have actually paid for the meal for herself, the whole experience would have been a net-wash in income vs. expenses.
Furthermore, on some occasions she would accept barter offers that were a little bit of a loss. For instance, she might have offered a $100 sidebar add for $75 worth of goods because she wanted the goods, but the customer was only willing to barter. In that case, the barter was a net loss of $25 because the value of the service she gave was worth more than the value of the services received and should could have easily found another advertiser willing to pay the $100 fee.
If you barter for services, are you out of luck and have to treat the received barter transaction as strictly income and can't account for the intrinsic expense of giving the customer a "free" advertisement?
How do you properly account for this and account for what is, essentially, the loss of income?