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  • Everything is Barter

    December 18th, 2017
    taxes
    If you drive me to the airport and I give you money, that's taxable. Or if we agree that I'll babysit your kids in exchange for the ride, that's taxable as well, being barter. [1] On the other hand, if you give me a ride to be helpful, and then later I watch your kids as a favor, I think that's not taxable. But I don't see how to draw the line here: instead of transacting in money or direct barter we're transacting in favors or social capital.

    In some cases I think it may come down to whether we make an explicit agreement vs doing things informally. If I let a friend live with me because I have a spare room, and then they decide to spend weekends fixing up the house out of gratitude, I think that's not taxed. But if we explicitly agree that I will waive rent in exchange to 12hr/week of house repairs that probably is taxed. Penalizing people for being explicit in their interactions with each other seems harmful, though, as clarity in expectations can be a good way to reduce conflict.

    Other things seem even messier. What if I take a job that pays less because I value the experience I'm gaining. What if it's for the fun? Prestige? Social impact? Or imagine I live in the US and want to donate to a charity that's tax-deductible in another country, and you vice-versa, so we each agree to donate to the other's charity. Or I agree to give up eating pigs in exchange to your giving up eating eggs. Is any of this taxable? Should it be?

    Mostly I'm just pretty confused. I think it's possible that lots of things are technically taxable but most people don't report them and the IRS doesn't really expect them to be reported?

    [1] Barter in the US is taxed as if we had each performed our services for "fair market value" in money. So if $50 would have been a fair price for the ride and for the babysitting, we each report an additional $50 of income.

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