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She should be charging a fixed fee for the review itself. She has a whole bunch of things she clearly doesn't need and isn't even paid for her labour...
by frandroid 7y ago
She should be charging a fixed fee for the review itself. She has a whole bunch of things she clearly doesn't need and isn't even paid for her labour...
- bdowling 7y ago> isn't even paid for her labour... The IRS considers payment in kind (goods in exchange for services) to be taxable income. [0] So, I’d say she’s getting paid. [0] https://www.irs.gov/taxtopics/tc420 https://www.irs.gov/taxtopics/tc420
- hnick 7y agoUnless I'm misunderstanding it's more straightforward. The article says she is reimbursed, so the steps are (based on my Aus understanding, US tax law may vary): 1) Buy product - taxable expense for business/work purposes 2) Write review 3) Get sent money equal to purchase price - taxable income Net, the money cancels out to no taxable income but she has the product. It was bought with her own money and still belongs to her. It's like if I run a blog, I bought a new PC to do my blogging (business expense), wrote about how nice it was, then the company sent me some money or a gift as thanks. I wouldn't have to pay tax on the PC if this happened.
- gregoryl 7y agoI'd not try that in Aus without some serious financial advice, or you'll end up with even more serious tax debt.
- bdowling 7y agoIn the U.S. a court would probably ignore the formality of the transactions you describe and simply look at the outcome. The outcome is that the reviewer has ended up with the property at no out-of-pocket cost, and would thus be considered income. See also Gregory v. Helvering (U.S. 1935) for the quintessential example of this principle. https://en.wikipedia.org/wiki/Gregory_v._Helvering https://en.wikipedia.org/wiki/Gregory_v._Helvering
- hnick 7y agoYou're probably right. We often have the legal idea of "arm's length" meaning a transaction that is coincidental or purposeful will be treated differently. I find this interesting in your link: "if a transaction has no substantial business purpose other than the avoidance or reduction of Federal tax, the tax law will not regard the transaction" I don't see how that doesn't apply to all the shuffling we see from big corps these days, licensing things they own to companies they own just to shift profits. Though that's another tangent.
- frandroid 7y agoSure, it's a net benefit for tax purposes, and she "gets things". But what I'm saying is that it's not a real fungible, useful income.