Recently, I saw a short blurb on the local news regarding a teenager who bartered his way from a cellphone to a Porsche. There’s an issue with this, of course, taxes. When you barter goods, you’re supposed to send a Form 1099-B to the other person (to represent the difference in the value of goods).
So let’s say I trade my worthless cellphone (valued at $10) for your worthless headset (valued at $10). No big deal. However, say I trade a worthless cellphone for an iPad (worth $300). The other person is supposed to send me a Form 1099-B showing $290 value of bartered goods.
It turns out that the teenager made 14 trades to go from a cellphone to a Porsche. Clearly, he should have received a few 1099-B’s en route. Perhaps he did, but I suspect otherwise.
In any case, just a reminder that if you barter your cellphone for a $9,000 used Porsche, you should expect to pay taxes on the difference in value.
