Isn't that one of the things money is for?

Today I put out copies of the summer issue of Kallah Magazine in Flatbush. One of the places I stopped in was a store for frames and paintings. The propieter said he almost never pays for advertising but would consider a barter. I pointed out that, aside from not being in great need, or any need for that matter, of frames and paitings, the prices on his wares likely exceed my own by far. He did not deny that and pointed out a huge picture that sold for $18,000. [that is not a typo]. So he proceeded to tell me about an innovative idea -- three way bartering.

Back in primitve times it would probably work as follows: if the chicken farmer wants flour, but the miller wants milk rather than eggs, they would find someone with milk who wants eggs to make the exchange work. In this situation, he wants the ad, and I don't want the picture frames, so we find a third person who offers something I could possibly use who wants the frame. But you see, already thousands of years ago already, people realized that it is not always convenient to find someone who will form the third to complete the barter triangle, and even if you do, that person may ascribe greater value to the milk than to the eggs or flour.

That is why money was invented. Its three functions (sanother economics lesson here) are: a medium of exchange, a measure of value, and a store of value. The first one is there to eliminate the need for bartering goods with a universal currency with a set measure of value. So why this overwhelming desire to revert to a bartering system and a complex one at that? I could only guess that the motive here is to keep the exchange of value off the books, for if no money changed hands, they can say there was no income to be entered for the IRS. But what they fail to realize is that advertising is a fully tax deductible business expense, so it is not something one pay with "after tax" dollars, so to speak.


SephardiLady said…
Sounds like he is trying to give you an opportunity to keep income off the books although in reality the IRS does require that the Fair Market Value of goods and services received in a bartering transation be claimed as income. Those who dot their i's and cross their t's aren't going to want to get caught in too many bartering arrangements because it just would add to the bookeeping unnecessarily.
Ariella said…
I thought you would be the one to know the IRS regulation on bartering. I suppose people think without even a cash trail, there would be no trace of the transaction.
SephardiLady said…
In an inventory business, I believe audit procedures would uncover excessive bartering. A former supervisor of mine worked for a state tax audit division, but I haven't been down that route yet.
SephardiLady said…
Left off. . . .cash trail isn't everything. But, as shomrei mitzvot, we should spend less trying to beat the system and more time being yashar. It is far more becoming.

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