Friday, November 28, 2008

You Need To Report It!

Way back in time before money was as trustworthy as it is today as a medium of exchange people used to barter. According to Wikipedia, “Barter is a type of trade in which goods or services are directly exchanged for other goods and/or services, without the use of money. It can be bilateral or multilateral, and usually exists parallel to monetary systems in most developed countries, though to a very limited extent. Barter usually replaces money as the method of exchange in times of monetary crisis, when the currency is unstable and devalued by hyperinflation.”

People still barter today despite the fact that we have a highly developed monetary system. For example, you have a plumber who is highly skilled at what he does and you have a mortgage banker who owns a beachfront property. The mortgage banker has an extensive, not to mention expensive, plumbing problem so he calls the plumber. The plumber comes out, works a couple of days, and fixes the problem and then hands the mortgage banker a bill for $7,150.

The mortgage banker, short on money, says to the plumber, “Hey, I have a beach home I usually rent for $7,500 for the whole week. I’ll let you have the place at no cost if you will accept my offer as payment in full for the $7,150 I owe you, deal?” “Deal.” the plumber replies. Well guess what? They both need to report the dollar value of the benefit they received as income! Sometimes seemingly simple little “oversights” like these can lead to tax problems requiring the services of a tax professional. Be careful and don’t forget…you need to report it!

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