IRS Gives Banner Ads a Break

Uniting tax code with a new technology such as the Internet can be difficult. For now, the Internal Revenue Service has decided to leave companies alone that swap banner ads on web sites.

Barter exchanges are arrangements where companies swap ads and where no cash changes hands. Companies won't have to report these transactions with fair-market values of less than $1. The IRS believes most banner-ad swaps have a value much lower than $1. Usually, the IRS allows companies and individuals a one-year amnesty for a new ruling, but for this change, the IRS has decided not to penalize previous transactions in prior years.

Internet-related business practices present unique challenges for the IRS and taxpayers as they struggle to define transactions. This has prompted the IRS to consider new rules. New reporting regulations for both barter transactions and electronic commerce generally may be the answer. The IRS says it would like to hear comments on the subject from interested parties.

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