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how do one handle donations - bonnie's mention...contin'd...

updated tue 17 aug 04


pdp1@EARTHLINK.NET on sun 15 aug 04

Hi Bonnie,

Thank you for the info, and for the fun of this thread...

Now, here is another question for you...

Lets say I have a 1928 series $100.00 Dollar Bill...

And you have a 1934 series $100.00 Dollar Bill...

Neither of our bills are in such pristine condition as to be
'worth' much above face value in the opinion of a qualified
appraisor in these matters...

None the less, you wish to buy my 1928 series, and, I wish
to buy your 1934 series, so, we each have an asking price of
$100.00, and, so we just exchange our respective bills.

Now, did we each recieve income, and...?



----- Original Message -----
From: "Jeremy/Bonnie Hellman"

> Hi Phil,
> In a barter transactions between 2 businesses (or 3 or 4),
each and every
> business records income.
> Your business and my business trade (barter), one of your
fabulous tools for
> one of my fabulous pots. Even if my business normally
sells that type of pot
> for $45 and your tool normally sells for $55, I should
record $55 of income,
> and you should record $55 of income.
> Now I will use your fabulous tool in making more of my
fabulous pots, so I
> also have $55 of expense on my Schedule C. The $55 of
income and the $55 of
> expense net out to zero, so my business bottom line is
> However, you have decided to give my fabulous pot to your
best friend as a
> birthday gift, and your best friend has nothing to do
with your business.
> Therefore, you cannot include $55 of expense on your
Schedule C tax return.
> You have included $55 of additional income on your tax
return, and $0 of
> expense, and your net income is increased by $55.
> However you did not need to go out and buy a birthday gift
for your best
> friend, and the "cost" of that fabulous birthday gift to
you consists of 12%
> effective self employment tax on $55 or $6.60 plus your
incremental tax
> rate, say 14% on $55 or $7.70, for a total out of pocket
cost to you of
> $14.30. It's not really a lot of money for such a fabulous
birthday gift for
> your best friend, and that's why you might do it. If your
incremental tax
> bracket is 26%, the tax cost is $14.30, and the total cost
is $20.90, still
> not a bad deal for you. You've given a birthday gift worth
$45 or $55 to
> your friend, and the cost was less than $21.
> Bonnie