I have a solo private practice (single-member LLC treated as sole proprietorship by IRS), and I provide specific services for a company in return for office space for my practice. No money is exchanged (i.e., the company does not pay me for my services and I do not pay rent for my business), but I understand this to be barter and am supposed to report the fair market value (FMV) of my bartered services as income. I have done some research on the IRS' and others' websites but don't have a clear answer on how to report this. In particular, what I've found focuses on barter "income" but not "expense". For simplicity, let's pretend that the FMV for my service is $1,000/mo and the rent is $1,000/mo. and I do this for 12 months. Would I report $12,000 as business income on schedule C? Would I also report an expense of $12,000 in business rent, and would I furnish a 1099-MISC for the rent to the company? Here is my logic: if I didn't barter and instead received $12,000 in payments from the company and paid $12,000 in rent to the company, I would include them as income and expenses, respectively and I would also furnish a 1099-MISC to the company. If I bartered and only reported the income without the expense, I would owe more in taxes than if money did exchange hands. The other company would also owe more in taxes. Bartering is supposed to make things simpler, so it doesn't make sense that bartering would end up being more costly. Thanks in advance for any advice.
