Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 79-24

1979-1 C.B. 60

Section 61

IRS Headnote

Gross income; barter transactions. Certain members of barter clubs must include in income the fair market value of services received in exchange for services rendered. Likewise, the owner of an apartment building who receives a work of art created by a professional artist in return for the rent-free use of an apartment must include in income the fair market value of the work of art, and the artist must include the fair rental value of the apartment.

Full Text

Rev. Rul. 79-24

FACTS

Situation 1. In return for personal legal services performed by a lawyer for a housepainter, the housepainter painted the lawyer's personal residence. Both the lawyer and the housepainter are members of a barter club, an organization that annually furnishes its members a directory of members and the services they provide. All the members of the club are professional or trades persons. Members contact other members directly and negotiate the value of the services to be performed.

Situation 2. An individual who owned an apartment building received a work of art created by a professional artist in return for the rent-free use of an apartment for six months by the artist.

LAW

The applicable sections of the Internal Revenue Code of 1954 and the Income Tax Regulations thereunder are 61(a) and 1.61-2, relating to compensation for services.

Section 1.61-2(d)(1) of the regulations provides that if services are paid for other than in money, the fair market value of the property or services taken in payment must be included in income. If the services were rendered at a stipulated price, such price will be presumed to be the fair market value of the compensation received in the absence of evidence to the contrary.

HOLDINGS

Situation 1. The fair market value of the services received by the lawyer and the housepainter are includible in their gross incomes under section 61 of the Code.

Situation 2. The fair market value of the work of art and the six months fair rental value of the apartment are includible in the gross incomes of the apartment-owner and the artist under section 61 of the Code.