barter with renter

I made a barter contract with a renter to exchange $4000 of his labor for $4000 of rent.

I think I understand that if everything had gone correctly I would have claimed $4000 of income for the barter and then could have deducted the $4000 as an expense for repairs to the rental unit.

The messy part comes about because the renter did not do the work.

SO now I do not have any income from the barter but I think I still generate a 1099-MISC for $4000 because the renter received his art of the barter as free rent (which is barter income for him). After all, he isn't just a dead beat renter who didn't pay his rent depriving me of income. He actually made a contract separate from his lease for the barter.

Am I on the right track?

Can I somehow write this off as an uncollected debt? I of course still get my regular expenses for those months since I still had to pay the mortgage, etc. And I have receipts for the work that I had to have someone else actually do. I want to make sure this guy has more than just a civil decision following him around in the form of the 1099 putting the IRS on his ass.

Thanks in advance, Ken

Why did you continue to let him live there rent free after the first month?

I'm not a lawyer, but it sounds like the contract has not been fulfilled, or in other words no barter exchange actually happened. What did the contract say as far as cancellation, penalties, and so on?

No, because you never included it in income. See Pub 535 for discussion of business bad debt. The next question is, do you have a rental expense for repairs that you "paid" for but didn't receive? That might come back to what is ordinary and necessary -- what was the nature of the repair, what were the qualifications and cost of the renter vs. a professional, etc.

Sounds like you have been to court, then. Whatever the ultimate resolution of your case in that regard may be, it will probably be more satisfying than trying to sic the IRS on this guy.

-Mark Bole