I did not see the issue of Bee Culture that is mentioned in this thread
- therefore I might be missing something - tax regulations are very
complex and I am not an expert.  But I think this thread steps into the
territory that Lloyd was warning about...

According to the IRS, bartering income is defined by the following
statements:

"Bartering occurs when you exchange goods or services without exchanging
money. An example of bartering is a plumber doing repair work for a
dentist in exchange for dental services. The fair market value of goods
and services exchanged must be included in the income of both parties."

In another section of the IRS web site, they state than any income from
bartering exchanges (which are businesses that specialize in bartering)
must be reported on 1099-B - it is not clear if this is the mechanism
that an individual must use to report bartering income.  Since the
company which provides the 1099-B does so to claim a valid expense - you
can bet that the IRS software checks to ensure that this expense has
been reported as income by the other party.

For the exchange that you mention to be legal, you must state that you
had income equal to the value of the goods or services received (in this
case, your charge for placement of beehives).  You may also, though,
claim that you had a valid business expense (the charge back to you for
the use of the land).  At first glance, these seem to offset one another
and thus would not increase your taxes - but this is deceptive due to
the Alternative Minimum Tax laws (which are complex even by IRS
standards).  For example, if most of your income is associated with
bartering, and you offset 100% of this income as business related
expenses, then you will certainly be forced to pay some minimum taxes
using these rules.  A good tax accountant might be able to get around
these rules - but I don't understand how it is done.

I can see no way of legally saving taxes with this exchange and would
appreciate an explanation if possible.  You could save taxes if you
reported the expense related to the barter - but not the income.  But
that is illegal as is made obvious by the IRS rules.

In reality, bartering exchanges happen all the time in our economy and
most people never report it as income or an expense on their taxes - let
alone file a 1099.  But this does not make it legal or the fines and
penalties any less if you are the one that is caught.

And I agree 100% with Lloyd - don't take anyone's advice except a CPA
who specializes in tax accounting (and preferably has experience in farm
tax law - it is a separate beast altogether).  They will stand behind
their work and recommendations - try getting that from any of the
companies producing tax software.

Scott

> -----Original Message-----
> From: [log in to unmask] [mailto:[log in to unmask]] On
> Behalf Of Russ Dean
> Sent: Thursday, March 04, 2004 9:23 AM
> To: [log in to unmask]
> Subject: [BEE-L] TAX TAX TAX
>
> I saw in a past issue of Bee Culture or something like that they had a
tax
> tip.  I have hives on other small farms and I charge a flat rate for
them
> to be
> there. And they charge me the same for land use.  See no money really
> changes
> hands. But it is legal and it does cut yours taxes. Yes, it does.
>
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