Code Sections and Treasury Regulations
Treasury regulation section 1.61-2 (d) and barter
According to the regulation above, the value of the commodity that is accepted for payment of a service (barter exchange) must be part of income inform of compensation if the exchange involves the use of property to pay for the services received. It means that the regulation permits the use of property for paying the value of services. However, the condition is that value of the property becomes an income in the form of compensation. Also, the regulation states that in a situation where the value of the services given is expressed in terms of their price, the assumption is that the property that the buyer uses to pay for the services has the same value as the price of the services. The assumption changes only if it is stated otherwise. The regulation also allows employers to use property to pay for the services of the employees. However, the regulation clarifies that if the value of the property is lower than the price of the services, the difference becomes part of the employee’s gross income as compensation. The compensation allows the employee to get the full value of his services.
- How the code sections and regulations work together
Every code section has its regulations. The relationship between the code sections and the regulations is that the latter (regulations) show how the code shall apply under different circumstances. The regulations work together with the code sections because each regulation shows the application of the code to a circumstance. The regulation also shows the situations of exception, where the code does not apply. Under such circumstances, there is a cross reference to other code sections with the suitable regulations. The exceptions and cross references in the regulations indicate the limitations of the regulations and the suitable codes that are applicable to such circumstances.
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