When exchanging services, it’s important to remember that bartering is considered income. While you may be able to write off expenses you incur during the barter, you must claim the fair market value of the services you provided as income. For example, if you charge $60 an hour as a massage therapist, and you trade a one-hour massage for housecleaning services, you may have to claim the equivalent income. When you trade assets, you may even be responsible for tracking capital gains or losses. If you have any doubts or questions, consult the IRS website.
When two people each have items the other wants, both people can determine the values of the items and provide the amount that results in an optimal allocation of resources. Therefore, if an individual has 20 pounds of rice that he values at $10, he can exchange it with another individual who needs rice and who has something that the individual wants that's valued at $10. A person can also exchange an item for something that the individual does not need because there is a ready market to dispose of that item.
It is estimated that over 450,000 businesses in the United States were involved in barter exchange activities in 2010. There are approximately 400 commercial and corporate barter companies serving all parts of the world. There are many opportunities for entrepreneurs to start a barter exchange. Several major cities in the U.S. and Canada do not currently have a local barter exchange. There are two industry groups in the United States, the National Association of Trade Exchanges (NATE) and the International Reciprocal Trade Association (IRTA). Both offer training and promote high ethical standards among their members. Moreover, each has created its own currency through which its member barter companies can trade. NATE's currency is the known as the BANC and IRTA's currency is called Universal Currency (UC).[28]
For instance, let's say your pipes burst at your home and you find yourself in need of a plumber. It's an emergency situation and if you don't hire a plumber fast, you'll be displaced and will have to move your family out of the house and into a temporary living situation. That certainly would be a bad thing. But should you barter your dog grooming services right now? Do you really want to trust your plumbing to the only person in town who'll do the job if you shampoo their poodle?
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An alternate currency, denominated in labour time, would prevent profit taking by middlemen; all goods exchanged would be priced only in terms of the amount of labour that went into them as expressed in the maxim 'Cost the limit of price'. It became the basis of exchanges in London, and in America, where the idea was implemented at the New Harmony communal settlement by Josiah Warren in 1826, and in his Cincinnati 'Time store' in 1827. Warren ideas were adopted by other Owenites and currency reformers, even though the labour exchanges were relatively short lived.[20]