Your Tax Question - 036

Dear John, I own a small business with a small amount of lawn that needs to be cut each week during the summer. The business owner next to mine mows my lawn and I in turn help her by power-washing her storefront. I want to show the lawn as an expense to my business and she wants to show the power-washing as an expense to her business but no money actually changes hands. How is this situation viewed by the IRS? Thanks, Max
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Hi Max,

What you have is a bartering service situation. The IRS requires that your business and hers both value the services that you receive and included it in your gross incomes. You will have to enter this information on your Schedule C or C-EZ. Your accountant can explain how to track this in your books.

I hope this helps,
John

PS. Email me and we can talk.

Your Tax Question - 021

Dear John, I rented a house to a gentleman who has agreed to fix-up the rental house in exchange for rent. How will this affect my taxes? Thanks, Rich
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Hi Rich,

What you are describing is a bartering arrangement. This means that even if cash does not change hands, you have to include the value of improvements as income on your Schedule C. Also, your tenant will need to include the fair market value of rent in his income.

Best wishes,
John

PS. Act now and reserve a spot on my limited client list for this tax season. Email me