Bartering as a Second Income

Bartering as a Second Income

Topics Espoused in Bartering as a 2nd Income:

Bartering as a Second Income
  1. Bartering – as Defined by the IRS
  2. More On Exchanging Money
  3. A Second Income Is Possible
  4. Bartering Creates The Income
  5. The Internet and Barter Clubs
  6. Barter Could Enhance Your Life

Bartering as a 2nd Income

Bartering as a second income is a neat concept as far as I’m concerned. You and I can both agree once upon a time people bartered way more than they made purchases.

Bartering is defined in the dictionary as, “trading goods or services without the exchange of money”.

The important part of the definition is, “without the exchange of money”.

Just so you are aware there are some hucksters in the world who claim bartering is income tax free. They propound information making you think the IRS doesn’t recognize bartering as a taxable event. Not true. Not true.

You can believe if an event like your death is taxable to the IRS, there ain’t much that’s tax free.

In fact, the IRS has an opinion on every act of commerce. You can read their opinion in the Publications they publish. I will get into that in a moment. You can earn a second income from bartering just please don’t fall for the totally incorrect and misleading narrative saying barter is a tax free event.

Note: Before we go any further please be advised everything in this article is for information only. Nothing is intended to be tax or legal advice. Always, and I mean always, consult with knowledgeable, competent professionals.

Bartering – At least as the IRS Defines It

This definition was copied from IRS Publication 525 (2019) page 20. You can download your very own personal copy simply by going to irs.gov. It’s that easy. By the way, this publication is 37 pages long and covers everything from barter to life insurance.

Here’s their definition:

“Bartering is an exchange of property or serv-ices.”

What They Say About Barter Income:

“You must include in your income, at the time received, the FMV of property or services you receive in bartering. If you exchange serv-ices with another person and you both have agreed ahead of time on the value of the serv-ices, that value will be accepted as FMV unless the value can be shown to be otherwise.”

FMV stands for Fair Market Value. I did not copy any of the examples they listed. My thought theology was anyone interested enough in bartering would download a copy of this publication and read the pertinent section. It happens to be the first topic covered under the Section Heading: Miscellaneous Income.

Enough of the IRS. I thought it was important enough to tell you what they say. So you don’t get caught up in one of the many “barter” scams floating around the web. Now onto the meat of the topic.  

We’re Not Done With Exchanging Money

Without exchanging money means you did not receive nor did you pay money. This kind of exchange can be very profitable if you work it right. One more time. Working it right DOES NOT mean tax avoidance. Enough said.

Bartering is what the old horse trading was about. One guy trades another guy his horse for something he wants. It is an even exchange meaning both recognize they receive value for their traded item(s).

It could work out just fine in other scenarios too. For example, party 1 trades a horse and party 2 trades mechanical work on the first party’s tractor. As long as the parties involved feel like they got something of equal or better value.

On the other hand, there may be trouble if one of the parties involved thinks he received an item of lesser value. But that’s not what this article was intended to examine. So we’re going to move on and forget about the guy who might think he got “barter burned”.

Moving along, bartering is as old as man. Or at least some men, namely, the guy writing this article. Hehehehehe, I do enjoy poking fun at myself.

I can’t fathom what Neanderthals traded but you know it was something. Maybe a dinosaur leg for an elephant tusk. Or maybe it was clubs, and not of the golf kind. Who knows, right?

A Second Income Is Always Possible

Given this is true, it is possible to create a second income from bartering. The reason is simple. Not everybody wants, or knows how, to barter. They would rather pay cash for the desired item.

You can see proof of that every day. Simply walk into any retail outlet and what do you see but shelves stocked with goods. People put those goods into carts and go to something called a cash register. The clerk scans the items and the person pays. Unless there’s more items behind the milk. Then obviously the clerk finishes scanning the rest of the items first. And then the person pays with either cash or card, or possibly writes a check.

That’s not very likely this day and age but I’m getting sidetracked again. My point is no one stands there and tries to barter a figurine they created for that gallon of milk. Because that won’t work and we know it.

I’m sure you’ll recognize another scenario I call “Unintended Bartering”. Unintended bartering occurs when party a has to give items to party b to pay off a debt. And that’s kind of like creating a second income. Okay, no it’s not. But we had fun, right?

I’ll bet you are wondering, “Where does the second income enter the picture?”. After all, you too take your cart to the checkout line and pay.

So before you have to say, “Show me the money!”, I’ll just go ahead and do that very thing.

The Art of Bartering Creates The Income

You can massage your bartering skills in any number of ways but this article will consider only two of them. First, you barter for an item and a customer or friend wants the item but doesn’t want to barter.

You now are faced with a choice. Keep it or sell it. Being the astute business person you are, you sell it for its fair market value. Its fair market value, as you know, is above its barter value.

You have just created a win-win situation for you and your customer. The customer received the product and you received cash. And cash is still a good commodity to have in your possession no matter what the circumstances.

If you are a business owner, bartering lets you stretch your cash. Instead of paying for advertising, for example, you barter one or more of your products in return for the advertising.

These may seem like simple everyday activities that anyone can do. Not true. We’ve been groomed since we were children to put the items in the cart and queue at the checkout stand.

You have to be willing to step out of the mold and experiment. If you don’t try you won’t know if you can, or even want, to do it. What can it hurt? How much can it cost? The answer is nothing if you find it unpleasant or not worth your time.

Subsequently, you just move on and forget about it if you didn’t like it.

Barter Clubs are Even on The Internet

In this day and age, the Internet seems to be a great source for barter activity. There are online barter clubs just as there are offline barter clubs. While the nitty gritty details may be different, the principle is the same.

Bartering, by definition, does not change because the medium changes. It remains the trading of goods and/or services without the exchange of money. More often than not that is a good point for all barterers.

In my humble opinion, the without the exchange of money part deserves a bit more clarification.

Allow me to elucidate, it means money isn’t the main item exchanged in the transaction. Money could still very well be a part, albeit a small part, of the transaction.

On the other side of the coin money can also be a bigger part of the transaction too. As long as it isn’t the only item, offered up by one of the parties involved. Or even the majority of the value on one of the barterer’s part.

Because then it becomes a purchase. And that is something I am sure everyone who reads this article is quite familiar with.

Bartering Could Enhance Your or Someone Else’s Life

The beauty of being known as a person who will barter is it opens doors that otherwise may have remained closed. You see, a person who might prefer barter but is too timid to say so, will now open up to you.

This increases your opportunities to further develop your bartering skills into a healthy second income. Above all that is a good thing. No one I know would walk away from making extra money.

Moreover making money is certainly important as it buys us food, shelter and goodies. Barter may be the key that takes the shy person out of their shell and lets them blossom.

And I don’t actually know that for sure. But I’d bet my wife’s vacuum cleaner that it has the possibility to be the fuel they need to be more socially adept.



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