Property Exchanged for Services – Paul Gaulkin CPA

stacks of cash USAIn some cases, a taxpayer may receive property in exchange for services rendered. This property received is considered income and therefore the taxpayer must include the FMV of the property on their tax return. The amount that is included in income becomes the basis of the property to the taxpayer.

Price Agreed Beforehand

If the taxpayer performed the services for a price agreed on beforehand, the IRS will accept that a price as the FMV of the property if there is no evidence to the contrary. Problems arise when the amount of income that is being claimed in far lower than the FMV of the property.

Property Restrictions

If the property is subject to certain restrictions, the basis in the property is its FMV when it vests substantially. However, this rule does not apply if the taxpayer makes an election to include in income the FMV of the property at the time the transfer of property occurs, minus any amount the taxpayer had paid for it. Property is considered vested when it is transferable or when it is not subject to a substantial risk of forfeiture.

About Paul Gaulkin CPA

Paul Gaulkin is a Certified Public Accountant and enrolled with the U.S. Treasury to practice before the IRS. Mr. Gaulkin possesses unique technical knowledge in the process of securing relief for taxpayers nationwide with IRS and State tax problems. With an accounting degree from Florida International University, he is able to transform complex tax and accounting problems into easy to understand solutions.

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