Charging Rent

[Chotu]

Originally Posted by Barkingmad

Barter is taxable in Canada. As a tradesman I've done plenty - pave my driveway and I'll build you a stone fireplace....taxable! Goods and/or services have changed hands.
Does it get reported is another story!

As a TRADESMAN (business). But how does it go for a couple of individuals?

If your wife (if any) bakes a cake for your neighbor and in exchange they feed your dog while you’re away on vacation, is that taxable in Canada? It’s not in the USA.

By the same extension, neither is house sitting.

[valhalla360]

Originally Posted by Chotu

Only barter transaction brokers and those who barter through a barter exchange club membership are taxable in the USA.

House sitting doesn’t fall under this set of rules. Just read the 1099-B and 1099-MISC forms.

1099-B is for a specific type of barter transaction...ie: if you use a broker or club to handle your barter transactions. Originally, these were created as a tax dodge. The faulty idea was to break up the transactions over many parties to disguise it:
- I give you 6 chickens and you give me nothing. Another guy gives me a piglet and I give him nothing. Superficially, it looks like there was no barter when you look at individual transactions. Of course, there is a broker assigning market value and moving items between various parties on exchange such that no one is getting something for nothing.
- As opposed to directly, I trade you 6 chickens and you give me a piglet.

Enough people got caught up in it that the IRS set up a specific form that the broker must send out to those involved and to the IRS, so people couldn't play dumb

You still have to report barter transactions that don't go thru a broker.

From the IRS website:
"Persons who don't contract with a barter exchange or who don't barter through a barter exchange but who trade services, aren't required to file Form 1099-B. However, they may be required to file Form 1099-MISC, Miscellaneous Information. Refer to the General Instructions for Certain Information Returns PDF to determine if you have to file this form. If you exchange property or services through a barter exchange, you should receive a Form 1099-B. The IRS also will receive the same information."

"You must include in gross income in the year of receipt the fair market value of goods or services received from bartering. Generally, you report this income on Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship). "

But again as mentioned, people regularly violate the barter rules. As long as it's small scale and none of the parties reports it to the IRS, the IRS has a difficult time catching you.

[valhalla360]

Originally Posted by Chotu

As a TRADESMAN (business). But how does it go for a couple of individuals?

If your wife (if any) bakes a cake for your neighbor and in exchange they feed your dog while you’re away on vacation, is that taxable in Canada? It’s not in the USA.

By the same extension, neither is house sitting.

It is taxable in the USA. Doesn't matter if you are a tradesman/business or just a random individual. It's certainly more common in small business but not limited to such.

Of course, the IRS ignores a lot minor infractions (simply not worth the cost of chasing it down). If you take it to the nth degree it can get silly but per the letter of the law, if the cake was given predicated on the requirement that they feed the dog, it's barter and it's taxable.

[Chotu]

Originally Posted by valhalla360

1099-B is for a specific type of barter transaction...ie: if you use a broker or club to handle your barter transactions. Originally, these were created as a tax dodge. The faulty idea was to break up the transactions over many parties to disguise it:
- I give you 6 chickens and you give me nothing. Another guy gives me a piglet and I give him nothing. Superficially, it looks like there was no barter when you look at individual transactions. Of course, there is a broker assigning market value and moving items between various parties on exchange such that no one is getting something for nothing.
- As opposed to directly, I trade you 6 chickens and you give me a piglet.

Enough people got caught up in it that the IRS set up a specific form that the broker must send out to those involved and to the IRS, so people couldn't play dumb

You still have to report barter transactions that don't go thru a broker.

From the IRS website:
"Persons who don't contract with a barter exchange or who don't barter through a barter exchange but who trade services, aren't required to file Form 1099-B. However, they may be required to file Form 1099-MISC, Miscellaneous Information. Refer to the General Instructions for Certain Information Returns PDF to determine if you have to file this form. If you exchange property or services through a barter exchange, you should receive a Form 1099-B. The IRS also will receive the same information."

"You must include in gross income in the year of receipt the fair market value of goods or services received from bartering. Generally, you report this income on Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship). "

But again as mentioned, people regularly violate the barter rules. As long as it's small scale and none of the parties reports it to the IRS, the IRS has a difficult time catching you.

That’s exactly what I said about 1099-B.

Where you are off is 1099-MISC. I just closed all the tabs after reading them so I’m not going to spend another half an hour finding it all again. It mentioned businesses just like you did. Not individuals.


In any case, upon reviewing the examples, tax law is irrelevant anyway:

Letting someone use your house for free isn’t a barter. Letting someone use your boat for free isn’t a barter.

They are favors/gifts.

There is no contract requiring them to do anything at all as a service and they aren’t providing you any goods or financial exchange. You are gifting them the use of your boat to stay on.

I mean your interpretation is so wild that if you fill the gas tank of a car you borrowed as a courtesy, it all becomes a taxable event. Would anyone here that lends someone their car for the afternoon or who fills a tank as a courtesy or favor/gift to the car lender start declaring these things on their taxes? You’d be insane to do that and it’s not expected by the IRS

[valhalla360]

Originally Posted by Chotu

Letting someone use your house for free isn’t a barter. Letting someone use your boat for free isn’t a barter.

They are favors/gifts.

There is no contract requiring them to do anything at all as a service and they aren’t providing you any goods or financial exchange. You are gifting them the use of your boat to stay on.

I mean your interpretation is so wild that if you fill the gas tank of a car you borrowed as a courtesy, it all becomes a taxable event. Would anyone here that lends someone their car for the afternoon or who fills a tank as a courtesy or favor/gift to the car lender start declaring these things on their taxes? You’d be insane to do that and it’s not expected by the IRS

Intent has a great deal to do with what it is classified as. Of course, this creates a lot of gray area where people can muck about.

If you let me borrow your car with no "intent" to be compensated and you don't mention or even hint that I should fill it up...and it comes back with a full tank, there was no commercial transaction. You gave me the gift of using your car and I gave you the gift of a full tank of gas. Two separate events with no commercial intent.

If you made clear the expectation that if I borrow it, you expect it to come back with a full tank of gas, it becomes a commercial transaction. Quid Pro Quo.

Now if you truly let some random stranger borrow your boat with zero expectation of any sort of compensation or benefit, technically, there is no taxable event.

The problem with all this is IRS interpretation and as we all know, if the IRS says you owe, it's guilty until proven innocent. So when the IRS agent looks at the transactions:
- It's very plausible that if you let your friend of 20years borrow your car, they might with no prompting return it with a full tank. It's a tough sell for the agent if they wind up in a court battle and you stick to your story...and all over a tank of gas. Simply not worth the fight.
- It's not very plausible that you met some random joe on the internet and the next day you give them free use of your $500k boat for 6 months and just conveniently, he covers $15k in boating expenses as an unrelated gift to you who he never met before yesterday. You can bet they will assign that as $15k in taxable income for you.

[Mike OReilly]

Originally Posted by valhalla360

- It's not very plausible that you met some random joe on the internet and the next day you give them free use of your $500k boat for 6 months and just conveniently, he covers $15k in boating expenses as an unrelated gift to you who he never met before yesterday. You can bet they will assign that as $15k in taxable income for you.

In the typical sitting arrangement, it would not be "some random joe". By the time the arrangement is concluded my actual experience shows you've become good acquaintances, if not friends.

And I have no idea where this $15k came from. The sitter normally pays nothing.

[Chotu]

Originally Posted by valhalla360

- It's not very plausible that you met some random joe on the internet and the next day you give them free use of your $500k boat for 6 months and just conveniently, he covers $15k in boating expenses as an unrelated gift to you who he never met before yesterday. You can bet they will assign that as $15k in taxable income for you.

Ah!!!!
As usual when two reasonably intelligent people disagree on the forum, it’s because we are picturing two different things.

It happens a lot when people picture their specific boat instead of the boat being discussed and I think it’s happening here.

If someone covered any boating expenses at all, that’s not only probably taxable but immediately enters into the category of a bareboat charter and is subject to all the laws of a charter. So I’d agree with you.

We are just picturing two different scenarios.

My vision of boat sitting is nothing more than a gift to the person staying on the boat They are under no obligation except to be a decent human being and house guest. To do no damage. They are not responsible for any expenses whatsoever and are not providing any service. They are expected, however, to be responsible and to take care of the place they are staying for free just as if I let them stay in a room in my $800,000 house. (I don’t have a house) They are... house sitting. Or boat sitting. They are not providing a service and I’m only providing a gift.

Adding to the proof that it’s a gift, I’d favor people who are not experienced with boats and are looking to get a feel for the lifestyle, former sailors who got too old to have a boat anymore but want that lifestyle experience again, those financially unable to enjoy boating, etc.

Hell, I could probably 501c-3 the whole thing. Ha ha ha. That’s a joke. But not too far off if I chose only elderly and disadvantaged people.


And I guess all house swaps would be taxable events too?

[valhalla360]

Originally Posted by Mike OReilly

In the typical sitting arrangement, it would not be "some random joe". By the time the arrangement is concluded my actual experience shows you've become good acquaintances, if not friends.

And I have no idea where this $15k came from. The sitter normally pays nothing.

It was the original point of the thread...that the OP was going to charge rent for a room on his boat. Putting it in context of the "renter" happening to pay for things along the way would be a thinly veiled attempt to hide the intent.

With a house sitter, the owner it getting live in security and likely covering the utilities (some of which would occur regardless) and the sitter is getting free rent. Straight up barter.

Now if it's a good friend and you can document that friendship, you have a stronger case that you were "gifting" them the use of your house as long as you never admit to expecting the benefits. If it's some random couple you met thru housesitters.com the week before, it becomes much less believable that it was a gift.

But again for like the 10th time, if no one brings it up, the IRS has no real way of knowing about the house sitter. It's not that are legal. It's that you got away with tax evasion.

But similar to the boat situation, if they slip in the bathroom and it becomes a big lawsuit, lots of unusual things can happen.

[valhalla360]

Originally Posted by Chotu

My vision of boat sitting is nothing more than a gift to the person staying on the boat They are under no obligation except to be a decent human being and house guest. To do no damage. They are not responsible for any expenses whatsoever and are not providing any service. They are expected, however, to be responsible and to take care of the place they are staying for free just as if I let them stay in a room in my $800,000 house. They are... house sitting. Or boat sitting. They are not providing a service and I’m only providing a gift.

Adding to the proof that it’s a gift, I’d favor people who are not experienced with boats and are looking to get a feel for the lifestyle, former sailors who got too old to have a boat anymore but want that lifestyle experience again, those financially unable to enjoy boating, etc.

If this is truly your intent, by the letter of the law, you are correct. It's a gift.
- Do check the limits on tax free gifts though. If the IRS assigns barefoot charter rates as fair market value, it won't take long before you exceed the limits.

The problem is if an IRS agent ever looks at it, they are likely to question your intent as it would be very unusual to let some random person borrow an $800k boat with no compensation. They will likely assign the transaction a market value, send you a bill for the associated tax and then the burden is on you to prove otherwise.
- Not saying it's right but what you can expect.

[Chotu]

Originally Posted by valhalla360

If this is truly your intent, by the letter of the law, you are correct. It's a gift.
- Do check the limits on tax free gifts though. If the IRS assigns barefoot charter rates as fair market value, it won't take long before you exceed the limits.

The problem is if an IRS agent ever looks at it, they are likely to question your intent as it would be very unusual to let some random person borrow an $800k boat with no compensation. They will likely assign the transaction a market value, send you a bill for the associated tax and then the burden is on you to prove otherwise.
- Not saying it's right but what you can expect.

Ok, I hear you, but I think you have one part backwards.

The person staying is getting the taxable income. I get the loss. They are getting the bare boat charter value income. Not me.

[valhalla360]

Originally Posted by Chotu

Ok, I hear you, but I think you have one part backwards.

The person staying is getting the taxable income. I get the loss. They are getting the bare boat charter value income. Not me.

They will view it under the assumption you are getting value out of it because it makes no sense to give away thousands of dollars in value for no return to a random stranger.

So they assign a similar value to the charter income and let you prove otherwise.

[Sand crab]

I want to gently correct Montanans' post awhile back about Dillon, MT. I lived in Montana for 18 years and have been to Dillon many times. The city may not own plows but the county plows the roads including in the city limits. Some roads may be kinda rough but many are not so bad which is like most of Montana. They also sub-contract some areas like government owned parking lots to independents. Luckily they don't get much snow compared to many places there.

FWIW Dillon is actually high desert with just over 10" precip a year so it doesn't get that much snow but it does get some wind. Deserts are generally categorized by averaging less than 10".

[Barkingmad]

Originally Posted by Chotu

As a TRADESMAN (business). But how does it go for a couple of individuals?

If your wife (if any) bakes a cake for your neighbor and in exchange they feed your dog while you’re away on vacation, is that taxable in Canada? It’s not in the USA.

By the same extension, neither is house sitting.

Would still be considered an exchange of goods or services and considered taxable income taking it to the absurd. Is either party going really to claim a cake and a one off dog feeding?

It could probably be argued by some bean counter that a house sitter is providing a service in exchange for a place to stay.

In reality is it an issue? Or going to be reported as income? - NO! Well not by anybody I know at least....
What the govt. doesn't know can't hurt you!

[ChrisJHC]

Originally Posted by valhalla360

- It's not very plausible that you met some random joe on the internet and the next day you give them free use of your $500k boat for 6 months and just conveniently, he covers $15k in boating expenses as an unrelated gift to you who he never met before yesterday. You can bet they will assign that as $15k in taxable income for you.

There was a thread on here a while ago from someone who lent their boat to their mechanic only to have it be impounded in a foreign country because it was full of drugs.

Not the same situation but maybe just as plausible as your scenario

[ChrisJHC]

A vaguely related article of a cruise ship that “kidnapped” their passengers:

https://www.traveller.com.au/cruise-...bahamas-h21a9y