Interesting tax question

[PLOlover]

Let's say you make a decent yearly income of say 30K and file and pay your income taxes and everything.

Now let's take the following three scenarios.

A) You get all your groceries free from you neighbor in exchange for yardwork, running errands, other labor.

B) You get all your groceries free from someone but you do nothing in exchange. Pure gift.

C) You grow all your own food, you are some kind of vegan or something.

Now the question. Do you owe income tax on any of these?

[lehighguy]

I think gifts above a certain amount is taxed.

Definately taxed in A.

The question though, is that it is so easy to evade taxes in these kinds of transactions.

[jman220]

[ QUOTE ]
Let's say you make a decent yearly income of say 30K and file and pay your income taxes and everything.

Now let's take the following three scenarios.

A) You get all your groceries free from you neighbor in exchange for yardwork, running errands, other labor.

B) You get all your groceries free from someone but you do nothing in exchange. Pure gift.

C) You grow all your own food, you are some kind of vegan or something.

Now the question. Do you owe income tax on any of these?

[/ QUOTE ]

A: Yes
B: If your neighbor has true "donative intent," then no, you do not owe "Income Tax." You may however owe some sort of gift tax if it is over a certain amount.
C: No

[bobman0330]

Jman's right, except that the donor is usually liable for gift tax, not the donee. Also, unless you're involved in a organized barter exchange, it will be nearly impossible for the IRS to know you didn't pay your taxes.

[cardcounter0]

Might want to add the situation I found myself in for the entire year of 1999 --

You never need groceries, when ever you are hungry or need cigarettes, you simply visit a casino and have them write you a comp to one of their restaurants or buffets.
[img]/images/graemlins/wink.gif[/img]

[bobman0330]

[ QUOTE ]
Might want to add the situation I found myself in for the entire year of 1999 --

You never need groceries, when ever you are hungry or need cigarettes, you simply visit a casino and have them write you a comp to one of their restaurants or buffets.
[img]/images/graemlins/wink.gif[/img]

[/ QUOTE ]

Def. taxable income.

[cardcounter0]

I don't know. I relied on this from Frank Scoblete at the time:

[ QUOTE ]
When a casino gives you a free room, or a discounted room, or even free meals and show tickets -- this is not considered to be taxable income. Rather, these should be considered rebates. Rebates are not taxable.

Think of these freebies or comps as free airline tickets in exchange for frequent flyer miles. There was an effort to tax these free airline tickets, but Congress abandoned the effort. One reason why Congress did not pursue taxing airline miles and free tickets is that they constituted rebates.

If you buy a car and get $2,000 back (rebate) that is also not taxed.

If Congress or the IRS wanted to tax casino comps, special rules would have to be issued. So far, they have not been.

[/ QUOTE ]

I did buy a car last year, and got a $5000 rebate from Ford. I am not planning on declaring $5000 dollars in income from Ford Motor Company this year, nor do I claim the amount of the discount on an airline ticket to Vegas purchased with a special offer from my credit card.

A year's worth of free smokes and food from the casinos was a "rebate" on my action I was giving the casinos at the time.

At least that is my story that I am sticking with. If anyone has any actual IRS rulings to the contrary, I would be interested in hearing them.

[bobman0330]

Actually, I think you're probably right. But if you're a winning gambler, I don't see how you could get a nontaxable rebate, as a matter of tax logic. Even if you were a losing gambler, you should still be taxed, because gambling losses can only offset gambling winnings, not other types of income.

[PLOlover]

[ QUOTE ]
A: Yes
B: If your neighbor has true "donative intent," then no, you do not owe "Income Tax." You may however owe some sort of gift tax if it is over a certain amount.
C: No

[/ QUOTE ]

Ok, now what if in situation B) or even A) for that matter your neighbor is the one who grew the food.

In other words, if you don't owe tax on the food you grow for yourself, do you owe tax on food someone else grew for themselves and then gave to you?

[bobman0330]

[ QUOTE ]
[ QUOTE ]
A: Yes
B: If your neighbor has true "donative intent," then no, you do not owe "Income Tax." You may however owe some sort of gift tax if it is over a certain amount.
C: No

[/ QUOTE ]

Ok, now what if in situation B) or even A) for that matter your neighbor is the one who grew the food.

In other words, if you don't owe tax on the food you grow for yourself, do you owe tax on food someone else grew for themselves and then gave to you?

[/ QUOTE ]

It doesn't matter where the food came from for purposes of your income tax. If you barter the food with your neighbor, then his taxes will be based on the difference between his cost of acquiring the food (roughly) and the value of what he receives for it. But your taxes will be dependent on how much you paid for whatever you barter with.