Free Accomodations how to account for

Then the room would have stayed empty even if the room were not occupied by the chef. Would the chef have come to the B&B if he wasn't getting paid to do so?

The more relevant question is, would the chef have come to the B&B if the free room (or reimbursement of lodging expenses somewhere else) wasn't included in the deal?

-Mark Bole

No the Chef would not have come, if accommodations was not included. He got paid $500.00 for his services and was provided free accommodations and also free food.

Though there was no >

Actually there is nothing relevant about this entire thread. Booking the room as a rental in my opinion is absurd.

If he had to supply his/her own lodging then the consulting fee would increase.

Who ever questioned QB not having the functionality of being able to account for barter transactions.

You indicated that it was part of the deal. Did the chef have options? That is to say was the chef offered cash in lieu of staying at the B&B? If this were a bater transaction then the room was anything but free.

No one, certainly not me.

-Mark Bole

Whether he had "options" was irrelevant. It was clear from the beginning that this was a barter transaction.

-Mark Bole

No, the consulting fee is the same either way. In one case it would be paid entirely in cash, in the other (the way it actually happened) it was paid part in cash and part in bartered services.

-Mark Bole

Isn't there anothe consideration? If the room's value were part of a barter arrangement, it would be reportable on a 1099 as income to the chef.

If the room were provided solely as a convenience to the inn, it's not income to the chef. Kinda like sleeping quarters at the firestation.

The requirement for including this in the year-end 1099-MISC was mentioned by me in an earlier response. In an audit, the IRS will frequently ask small business owners about any bartering income they received.

The "lodging provided as a convenience to the employer" issue only pertains to employment relationships. Firefighters (and crew on a cruise ship) are employees. The chef was not an employee, he was an independent contractor. For tax purposes, he has no choice but to treat it as part of his gross receipts (assuming he's a sole proprietor), possibly offset by an equal amount of ordinary and necessary business expense for travel. To the extent the room included personal luxuries that are not ordinary and necessary in his line of business, that portion would be taxable income to him.

Leaving aside the tax issues, both businesses (the inn and the chef) presumably are using accounting as a tool to manage their business, to know where the revenue is coming from and where it's going to. Chef needs to know how profitable trips like this are for him, likewise the innkeeper needs to know whether this type of activity is helping the business. By not recording such transactions in their books, they would be omitting valuable management information.

If the transaction had been all cash, for example the overall fee included enough cash for the chef to purchase his own accomodations somewhere else, I don't think anyone would be having this discussion.

What seems to be tripping up some of the responders to this thread is the cashless (barter) nature of part of the transaction. Just because it was cashless doesn't make it any less real or subject to possible taxation. While "lost revenue" from a clogged toilet or a failed sales call is not something to be entered on the books, it was a mistake to think that this situation was anything like that.

-Mark Bole

Not to my eyes.

Or sleeping quaters for the crew on a ship. Or the free lunch given to employees if they stay at their desks during lunch. I agree with you. This is not a barter transaction.

If it were reported on a 1099 it would be a wash for the chef since he would now have a lodging expense deduction equal to the included value of the rental.

Its not tripping anyone up. I simply do not consider this to be a barter transaction.

Is the Chef an employee W-2 or an independent contractor 1099? Very different rules apply.

Why don't you just go read Publication 15-B? Especially page 15.

No one here is confusing independent contractors with employees.

There is a world of difference between, teach me how to bake a pie in exchange for a one week stay at my B&B and teach me how to bake a pie and you can stay at the B&B while teaching.

You seem to be. You talk about employees and 1099's. Maybe you didn't intend to mix the two, but you have.

Not as the IRS looks at it. They insist on the why.

Certainly a lot of meat in this thread that has been salted with many opinions but no one has boiled it down and served an answer. The simmering question I have is, was the food any good?

The chef would not of shown up without airfare, room and board, and fee being paid. From an accounting perspective, the answer depends on how much detail the owner wants. If the owner is only concerned with the bank balance, you could ignore the non-cash portion of the costs. At the other extreme, you could capitalize all the cost and write it off as each meal is served.

From the government perspective, the $720 should be 1099ed and would be off setting income and expense on everybody's tax returns. As Mark pointed out, the bed tax issue needs to be resolved. Does the taxing agency have regulations for bartered transactions?

Allan, on the accrual basis would you write off an uncollectable receivable by simply voiding the sale? (I'm not sure if that is a question markable question)

Macy