Knowledgebase: IRS Tax Reporting
IRS - What is the difference between "trade dollars" and "trade credits"?
Posted by Bruce Kamm on April 04 2010 05:42 AM

Q: What is the difference between "trade dollars" and "trade credits"?  

A: Trade dollars are no different than cash and are reported by a barter exchange (third party record keeper) to the IRS as sales, the same as cash. Note that there could be cash or trade dollar expenses that offset trade dollar revenue making it a wash. And cash and or trade dollar expenses could be more than sales, which could create a loss.

Trade credits are different than trade dollars, as they can only be used with cash to reduce the cash requirements for purchasing. Many companies book trade credits as a prepaid expense.

Barter sales, where the company or individual received trade dollars, are reported on a 1099b to each member of a trade exchange, as well as to the IRS.

Trade credits are not reported on a 1099b and are typically not taxable until they are spent.

Disclaimer: This should not be considered legal, accounting or tax advice. Always seek professional guidance from your accountant or tax advisor.
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