Hypothetical Prostitution/Bartering Question

DISCLAIMER: I am not your client, you are not my lawyer, I am not seeking legal advice, this is all hypothetical, blah blah blah.

Let’s say I own a 10-unit apartment complex, and I charge the same amount of rent for each unit. For purposes of this discussion, let’s say it’s $500 per month. I’m in total compliance with all building, landlord, and related state and municipal codes.

I offer my tenants a deal: they can pay their rent in whatever way is easiest for them.

The tenant in Unit 1 writes me a check for $500 USD each month.

The tenant in Unit 2 pays me in one ounce of high-grade medical cannabis per month (it’s legal in our state and we both have cards).

The tenant in Unit 3 pays me with a check for $400 USD and a few bottles of top-shelf wine from the vineyard his family owns.

The tenant in Unit 4 pays me in x Bitcoins, where x is whatever $500 USD is worth in Bitcoins at the time of trade.

The tenants in Units 5-9 pay me in USD, but I cut them a break on the rent if they do various jobs around the complex, such as shoveling snow or whatnot. I cut them a break of $12.50 per hour’s work.

The tenant in Unit 10 is pretty open sexually and doesn’t mind paying the rent with sex, so she lives rent-free. :smiley:


How many of these situations are legal? Is my income tax liability the same ($500 per month, per unit, no questions asked) on each unit?

Since this involves legal opinions, let’s move it over to IMHO.

Colibri
General Questions Moderator

Could somebody please clarify what a Bitcoin is?

Purple: It’s an electronic currency.
Homie,

"Is my income tax liability the same ($500 per month, per unit, no questions asked) on each unit? "

You have to go with the fair market value of the goods.

The IRS addresses bartering income under “topic 420”

“How many of these situations are legal?”
Some tenancy laws might make using anything but cash illegal. That would very much depend on the jurisdiction. If prostitution is illegal in your jurisdiction, that would be illegal.
For medical pot, it’s under prescription, right? If so, it would be very surprising if prescription holders can sell prescription drugs to each other.

n Canada, prostitution is not illegal. Soliciting (except in private) is, so the act of offering sex for money or vice(?) versa is illegal if done in the corridor rather than the apartment. Keeping a common bawdy house - i.e. a place where people go to have sex as a business - i also illegal, but I’m not sure how hat works if it’s the tenant’s private apartment, or whether it would require more than one customer.

(There was a case of a dominatrix in Montreal who argued that her business was not a common bawdy house…)

It’s not actually a prescription. I think it would have to be approved by the FDA in order to be prescribed, and it’s not. In WA it’s called a recommendation. I think it is true that you can’t sell it to people though. Even the dispensaries seem to call it a “donation” although I doubt they’d give it to you without paying the suggested donation.

Same in California as far as the prescription v recommendation part.

I’m with MichaelEmouse – the big issue is probably making sure you report all this as income, specifically as the fair market value of the goods and services you’re receiving, even if the FMV is more than what you’re offsetting the rent by. That would be a possibility in every situaton except cash; the yardwork especially seems like a pitfall there.

As for the actual rent transactions: Paying with sex is illegal if prostitution is illegal (which it is everywhere in the U.S. except parts of Nevada, where IIRC it requires strict licensure).

Assuming that paying with cannabis is legal in your state, it’s still illegal as a matter of federal law. The FBI isn’t prioritizing arrests for MJ possession or small-scale distribution, but they would have the right to arrest you. (And of course they know all about it because you’re reporting it on your income tax returns.)

Some (most? all?) jurisdictions do not allow sale of liquor between individuals, and even if the tenant is construed as an agent of the business operation, that business may have to sell its wares through a state-regulated distribution network instead of hand to hand. But it might be OK. It’d depend on the local law.

I don’t know what a Bitcoin is, but if it’s what it sounds like, it’s probably OK same as the rest so long as you’re carefully paying taxes on the fair market value (I don’t know how or if that would fluctuate, but that’s a wrinkle you’d have to be on top of.)

–Cliffy

How is fair-market value determined?

Suppose a person is getting “paid” in eggs from someone’s backyard chickens. Can he report the “income” based on the price of CAFO eggs at WalMart, even though they are eggs from organically-fed free-range hens?

I thought that the Feds weren’t allowed to use your tax return as evidence for illegal income. If they are, there’s a Fifth Amendment issue, in that someone who has earned illegal income would be compelled to testify against themselves on their tax return.

Paying with bottles of wine might be against some law.

I don’t honestly know about this, but even if they can’t use the statement as evidence, they’ll still know what’s up. 15 minutes surveillance on rent day, they’ve got you red-handed.

–Cliffy

In this case, the IRS is going to be able to make a strong argument that the fair market value of the various payments is the equivalent of $500. That’s the price that the landlord himself set for a month’s rental and he accepted these gifts as being equivalent to that.

And that’s probably just a minimum figure. Consider the third tenant who gave the landlord $400 and some bottles of wine (let’s say it was five bottles). Based on the $500 equivalency, the IRS could declare that the fair market value of the wine was $100.

But suppose the IRS can establish that the winemaker regularly sells the same wine for thirty dollars a bottle. In that case, the IRS could declare that the fair market value of the five bottles the landlord received was $150.

If I remember it right we used to call this “hustling.”

I used to play with some kids whose mother’s landlord “took it out in trade.”

I don’t know what he claimed at the end of the year, but they got a place to stay.

Legal has always been a point of view.

Maybe. But when the people who think something isn’t legal are police officers, judges, and prison guards, it’s probably a good idea to go along with their point of view.

Applicable rent control statutes may also limit the manner a person can pay in.

What if you allow an unemployed woman you met at church to live in one of your apartments rent free as a matter of charity. What if you then start screwing? Does the law now give a crap? What if instead of living in a rental unit, she moves into your place? Is a non-rent-contributing sex partner a prostitute in the eyes of the law?

I know plenty of people who live with a non-income-earning boyfriend/girlfriend; I am sure that these folks are having sex. I am also certain that if the non-payer decided to stop having sex, the person with the job would end the relationship, and kick out the other person. Isn’t this an exchange of something of value contingent upon sex?

You gotta be fucking kidding me

OK, that’s pretty clear cut, but suppose someone collects a bunch of eggs from their free-range hens, and trades them to their neighbor in exchange for a bunch of their neighbor’s apples from the trees in their backyard. Would the fair-market value have to take into account that the apples were organically grown and the hens free-range? [Would the IRS really care about this anyway?]