QUESTION
When a business trades (barter/exchange) their services for your property, is it legally considered a cash transaction?
Asked on Mar 08th, 2012 on Business Law - Colorado
More details to this question:
Specifically, you trade in your old car for $450 for $350 worth of services to a business, is it legally considered a cash transaction? As if you''d sold the car for 450 THEN bought services for 350. I was told by my Colorado mechanic that, because it was a trade-in, they didn''t have to treat it as a "real" transaction.
I understand the IRS treats barter/exchange exactly the same as cash transactions. Is there a Colorado (or national) statute that says barter/trade is the same as cash as well?
1 ANSWER
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For tax purposes, a like-kind exchange is not taxable except to the extent of the cash that changes hands. If you trade your Ferrari for my Chevrolet, and no cash changes hands, you do not have income or loss from the transaction.
Answered on Mar 09th, 2012 at 3:43 AM