Barter

Barter occurs when two or more parties exchange goods and services without using money. Barter is most useful in situations where it is difficult to obtain hard currency or when there is a high rate of inflation. Barter may also be used in order to avoid income taxation, since barter transactions cannot be traced through the monetary system. However, these transactions are considered taxable by the Internal Revenue Service at the value of the transactions. Another benefit of barter transactions is that they tend to build stronger ties between suppliers and customers. A further advantage is that it allows the buyer to conserve cash for transactions that must be settled with cash. An example of a barter transaction is when a homeowner hires a person to paint his house in exchange for giving the painter a bicycle.