Barter Income

[erchess]

"John" is a friend of mine. He is also a client. I do John's individual returns and the returns for his three for profit corporations but not the return for his nonprofit corporation. I am a sole proprietor.

As a hobby John makes two products that I desire. Therefore we worked out a trade of my services for his products plus his listing of me as a sponsor for a nonprofit he is trying to get going. I have nothing to do with the tax filings for the nonprofit but it legally exists and it has a volunteer board on which sit CPAs who handle its reporting.

The value of the sponsorship is clear because he sells them to the other businesses at a fixed price. We agreed to use the normal prices of my services as the value of the barter. Therefore I would make the following claims and I want to know if anyone disagrees.

The nonprofit reports another Sponsorship as a donation and I recognize income equal to that amount but also an advertising expense equal to that amount. What the Nonprofit actually does is of no concern to me since I have no part in it or its reporting.

As to the value of what he makes for me / the value of my services he recognizes income on line 21 (hobby income) and since he is better off with the standard deduction he gets nothing for hobby expenses while I recognize the same amount of Sch C revenue.

[JG EA]

I could be wrong but, I would say the sponsorship has nothing to do with the trade. You correctly list the income for the price of doing your return, you don't count the expense because you bought something that isn't connected with your business, you would count the expense if it was connected with your business, and he counts it on his tax return.

I don't understand the selling of your sponsorship, but if he gets money and you get advertising I think that would be an additional trade.

[taxea]

The way I understood this barter is:
you purchased item/s from John in exchange for doing his return as a barter.
you both agreed that what you paid him for the item/s included the advertising.
So I would say:
His income is the amount you would normally charge for his return. His hobby expense is what it cost him to provide the item/s and his cost for creating the advertising for you.
Your business income is the amount you would normally charge for his return.
Your business expense is the cost of the advertising.