judy motzkin on thu 8 jun 00
Nils wrote:> Another discrepancy is that you can donate
my
work at market
value, but I cant. I can donate yours, so if we swapped
and donated each
others ( of equal value) we are essentially getting
around the tax law.
If we swapped pots,I think we would, by tax law, have to
count as income the value of the barter. I guess you have
to gift the piece to me. What is the real difference
here?Bonnie?
Judy
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Olivia T. Cavy on mon 12 jun 00
Hi Judy,
The real question is when is a gift a gift, and here you'd have to look
to the intent of the giver. If I give you one of my pots as a gift, I
have no expectations of receiving anything in return, not money, not a
pot, not your services of any kind. If we cut a deal whereby I gift you
one of my pots and you've previously agreed to gift me one of your pots,
this is hardly a gift.
You may ask HOW is the IRS to know? Probably they won't. Your return is
statistically unlikely to be audited, although it CAN be audited. You can
play the audit lottery game and hope that yours is NOT selected. But if
you're going to cheat, why bother going through the charade of exchanging
pots. Why don't I claim that I gave the charity $100 in cash? Either way
is against the law and it's cheating. (Remember that a non profit
charitable organization MUST give the donor of cash donation of $250 or
more a contemporaneous written acknowledgement, and state that nothing of
value was received in return, or the amount of anything received in
return. As Neil Berkowitz pointed out, no charitable organization will
assign a value to any donated goods.)
If you're not audited, you can deduct anything, but that's not really
the point. The point is to comply with tax law to the best of our
ability. If you read the fine print above your signature on a tax
return, you are stating that "Under penalties of perjury and other
penalties set forth in
the instructions, I declare that I have examined this return, including
accompanying schedules and statements, and to the best of my knowledge
and belief, it is true, correct and complete." This statement goes on to
say, "Declaration of preparer (other than taxpayer)is based on all
information of which preparer has any knowledge."
If you and I, as artists with businesses, exchange our own pots (or if
we do this in a mutli-step transaction whereby I give A a pot, A gives B,
B gives C, C gives me a pot), we have bartered, then we each would be
including in income the value of the pot we received. Once I've picked
up the value as income, it's essentially the same as if I went out and
bought your pot and then donated it, or just sent the charity a check
for that amount. Now if the charity is going to auction the pot, and get
more than the fair value for the pot, they'd be better off getting the
pot. However, as others have mentioned, when I include the value of the
barter on my Schedule C, I may be increasing my taxable income and my
self-employment income. Even if I itemize deductions and am not subject
to Sch A phase-outs, I will only get a deduction for my tax rate on my
return, and I won't recover the self-employment tax, so my elaborate
transaction will end up costing me money in the long run.
At the Karen Karnes sale last year at The Clay Place in Pittsburgh, I
was there when a man came in and bought 2 of the donated pots (so Karen
and her partner would receive the money) intending to donate the pots to
the Cental Catholic High School auction, where the school would receive
whatever money those pots auctioned off for. Since Elvira Peake, the
owner of the Clay
Place, did not keep any money from the Karen Karnes sale, this was a
beautiful example of a donated pot helping twice! Note that because
neither The Clay Place, nor Karen Karnes is a charitable, non-profit
organization, nothing would have been deductible to the potters who
"donated" their work.
Note that the materials and other direct expenses involved in the making
of those pots would have been deducted on any business tax returns of
the potters who made the pots.
As usual, your individual tax situation may vary and you should consult
your own tax
advisor to see what applies to you.
Bonnie
Bonnie D. Hellman, CPA in PA & CO
PA work email: oliviatcavy@juno.com
PA home email: mou10man@sgi.net (that's the number 10 in the middle of
the letters)
> From: judy motzkin
> Reply-To: Ceramic Arts Discussion List
> Date: Thu, 8 Jun 2000 12:35:05 -0700
> To: CLAYART@LSV.CERAMICS.ORG
> Subject: Re: tax and donations
>
> Nils wrote:> Another discrepancy is that you can donate
> my
> work at market
> value, but I cant. I can donate yours, so if we swapped
> and donated each
> others ( of equal value) we are essentially getting
> around the tax law.
>
> If we swapped pots,I think we would, by tax law, have to
> count as income the value of the barter. I guess you have
> to gift the piece to me. What is the real difference
> here?Bonnie?
> Judy
>
> =====
> www.motzkin.com
_________________________________________________________________________
_____
> Send postings to clayart@lsv.ceramics.org
>
> You may look at the archives for the list or change your
subscription
> settings from http://www.ceramics.org/clayart/
>
> Moderator of the list is Mel Jacobson who may be reached at
> melpots@pclink.com.
________________________________________________________________
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Norman van der Sluys on mon 12 jun 00
Just curious. How many of you out there actually report barter income? And how do
you determine the value of the goods/services received?
Norman van der Sluys
In idyllic western Michigan, where it is raining AGAIN and I am exhausted from
setting up a dual-boot Windows 98 / Windows 3.1 for a customer. Clay is so much
more satisfying!
"Olivia T. Cavy" wrote:
> Hi Judy,
>
> The real question is when is a gift a gift, and here you'd have to look
> to the intent of the giver. If I give you one of my pots as a gift, I
> have no expectations of receiving anything in return, not money, not a
> pot, not your services of any kind. If we cut a deal whereby I gift you
> one of my pots and you've previously agreed to gift me one of your pots,
> this is hardly a gift.
>
> You may ask HOW is the IRS to know? Probably they won't. Your return is
> statistically unlikely to be audited, although it CAN be audited. You can
> play the audit lottery game and hope that yours is NOT selected. But if
> you're going to cheat, why bother going through the charade of exchanging
> pots. Why don't I claim that I gave the charity $100 in cash? Either way
> is against the law and it's cheating. (Remember that a non profit
> charitable organization MUST give the donor of cash donation of $250 or
> more a contemporaneous written acknowledgement, and state that nothing of
> value was received in return, or the amount of anything received in
> return. As Neil Berkowitz pointed out, no charitable organization will
> assign a value to any donated goods.)
>
> If you're not audited, you can deduct anything, but that's not really
> the point. The point is to comply with tax law to the best of our
> ability. If you read the fine print above your signature on a tax
> return, you are stating that "Under penalties of perjury and other
> penalties set forth in
> the instructions, I declare that I have examined this return, including
> accompanying schedules and statements, and to the best of my knowledge
> and belief, it is true, correct and complete." This statement goes on to
> say, "Declaration of preparer (other than taxpayer)is based on all
> information of which preparer has any knowledge."
>
> If you and I, as artists with businesses, exchange our own pots (or if
> we do this in a mutli-step transaction whereby I give A a pot, A gives B,
> B gives C, C gives me a pot), we have bartered, then we each would be
> including in income the value of the pot we received. Once I've picked
> up the value as income, it's essentially the same as if I went out and
> bought your pot and then donated it, or just sent the charity a check
> for that amount. Now if the charity is going to auction the pot, and get
> more than the fair value for the pot, they'd be better off getting the
> pot. However, as others have mentioned, when I include the value of the
> barter on my Schedule C, I may be increasing my taxable income and my
> self-employment income. Even if I itemize deductions and am not subject
> to Sch A phase-outs, I will only get a deduction for my tax rate on my
> return, and I won't recover the self-employment tax, so my elaborate
> transaction will end up costing me money in the long run.
>
> At the Karen Karnes sale last year at The Clay Place in Pittsburgh, I
> was there when a man came in and bought 2 of the donated pots (so Karen
> and her partner would receive the money) intending to donate the pots to
> the Cental Catholic High School auction, where the school would receive
> whatever money those pots auctioned off for. Since Elvira Peake, the
> owner of the Clay
> Place, did not keep any money from the Karen Karnes sale, this was a
> beautiful example of a donated pot helping twice! Note that because
> neither The Clay Place, nor Karen Karnes is a charitable, non-profit
> organization, nothing would have been deductible to the potters who
> "donated" their work.
>
> Note that the materials and other direct expenses involved in the making
> of those pots would have been deducted on any business tax returns of
> the potters who made the pots.
>
> As usual, your individual tax situation may vary and you should consult
> your own tax
> advisor to see what applies to you.
>
> Bonnie
>
> Bonnie D. Hellman, CPA in PA & CO
>
> PA work email: oliviatcavy@juno.com
> PA home email: mou10man@sgi.net (that's the number 10 in the middle of
> the letters)
>
> > From: judy motzkin
> > Reply-To: Ceramic Arts Discussion List
> > Date: Thu, 8 Jun 2000 12:35:05 -0700
> > To: CLAYART@LSV.CERAMICS.ORG
> > Subject: Re: tax and donations
> >
> > Nils wrote:> Another discrepancy is that you can donate
> > my
> > work at market
> > value, but I cant. I can donate yours, so if we swapped
> > and donated each
> > others ( of equal value) we are essentially getting
> > around the tax law.
> >
> > If we swapped pots,I think we would, by tax law, have to
> > count as income the value of the barter. I guess you have
> > to gift the piece to me. What is the real difference
> > here?Bonnie?
> > Judy
> >
> > =====
> > www.motzkin.com
>
> _________________________________________________________________________
> _____
> > Send postings to clayart@lsv.ceramics.org
> >
> > You may look at the archives for the list or change your
> subscription
> > settings from http://www.ceramics.org/clayart/
> >
> > Moderator of the list is Mel Jacobson who may be reached at
> > melpots@pclink.com.
>
> ________________________________________________________________
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> Try it today - there's no risk! For your FREE software, visit:
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>
> ______________________________________________________________________________
> Send postings to clayart@lsv.ceramics.org
>
> You may look at the archives for the list or change your subscription
> settings from http://www.ceramics.org/clayart/
>
> Moderator of the list is Mel Jacobson who may be reached at melpots@pclink.com.
L. P. Skeen on mon 12 jun 00
WHAT barter income?
> Just curious. How many of you out there actually report barter income? And
how do you determine the value of the goods/services received?
Olivia T. Cavy on tue 13 jun 00
Just a thought but if you are ever sitting across the table from an IRS
auditor looking over your tax return, the auditor will ask you a series
of questions before anything else. To parapharase, they ask if you
included ALL income on the return, if you receive any payments in cash
and if all of those were reported on the return, and if you received any
barter income and was that reported. There were a number of questions
that had to be answered verbally, all along the same lines.
Note that if you barter for otherwise deductible items (such as trading
pots you sell for tax services) it's a wash on your tax return because
presumably the income would equal the expense. The problem arises when
you barter those pots for non-deductible items, such as trading pots for
a haircut.
Bonnie
Bonnie D. Hellman, Pittsburgh, PA
PA work email: oliviatcavy@juno.com
PA home email: mou10man@sgi.net (that's the number 10 in the middle of
the letters)
On Mon, 12 Jun 2000 17:11:22 -0400 "L. P. Skeen"
writes:
> WHAT barter income?
>
>
> > Just curious. How many of you out there actually report barter
> income? And
> how do you determine the value of the goods/services received?
>
>
_________________________________________________________________________
_____
> Send postings to clayart@lsv.ceramics.org
>
> You may look at the archives for the list or change your
> subscription
> settings from http://www.ceramics.org/clayart/
>
> Moderator of the list is Mel Jacobson who may be reached at
> melpots@pclink.com.
________________________________________________________________
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