2

I'm aware that the IRS treats barter between businesses as the sale of services in both directions, and this make intuitive sense if you use an accrual accounting method. But how would you treat this if you use a cash basis? (This question is US-specific but may be relevant to other countries as well.)

  • It's still sale if services are in both directions. Value has been exchanged. That's taxable income for both sellers – keshlam Dec 4 '16 at 0:12
  • Right, but the question is how that would be treated from an accounting perspective. If you use a cash basis and no cash is exchanged, do you have to make an exception to the accounting method? – EnglishTeacherEric Dec 4 '16 at 7:02
  • I don't think I see how this is relevant to Personal Finance (as accounting is generally off-topic). – Joe Dec 6 '16 at 4:06
  • Anyone else self-employed? – EnglishTeacherEric Dec 6 '16 at 9:07
  • 2
    Indeed, I view this as legitimate on-topic tax question. Accounting is off topic only when not pertaining to personal finance. Self-employed is pretty personal. – JTP - Apologise to Monica Dec 6 '16 at 15:49
1

Make up a (realistic) value

If you don't track the accrued costs involved, then it means that the valuation of the deal will be somewhat arbitrary, but it still can be made by looking at the value of equivalent or similar goods or services.

It's rather similar to accounting treatment of (noncash) gifts, for example.

You make up a valuation, and as there are obvious tax reasons to make it as low as possible, the valuation should be justifiable or you risk the wrath of IRS. If you sell the same goods or services for cash, then the value of the barter deal is obvious. If this barter is the only time you're handling this particular type of goods, a wholesale price of similar items (either of your items, or the items that you're receiving in barter) could work.

  • So essentially we break the first rule of the cash accrual method which is to record implied values rather than actual financial exchange? We're deviating for compliance? – EnglishTeacherEric Dec 7 '16 at 13:50

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.