bartering housing for renovation work income tax,

QUESTION:
I'm a US citizen planning on purchasing a "fixer upper" in Cape Breton.
Treating this as either a rental or vacation home, I'd like to barter
housing for a retired carpenter in exchange for renovation work.
Would the US and Canada tax authorities accept an imputed rental "income"
(calculated from similar cash rentals in the area) and an imputed renovation
labor "cost" (again calculated from area labor cash rates)?  Would it be
easier (and legal) to make up receipts, or go through the pain of my renter
and I exchanging payments and reciepts?
--------------------------------------------------------------------------
david ingram replies:
I "love" Cape Breton Island and envy you.  Whatever you do though, make sure
you take the Ferry across to Port aux Basque, Newfoundland and get up to
L'Anse aux Meadows where the Vikings landed in 998 or 999 AD.  Then hightail
it out to Signal Hill in St John's where Marconi sent his first Transoceanic
Morse code after failing in Glace Bay on Cape Breton Island.
Don't miss Alexander Graham Bell's home at Baddeck,
http://www.pc.gc.ca/lhn-nhs/ns/grahambell/index_e.asp Fort Louisburg and
Rita McNeil's Tea House in Big Pond Either and oh yes, see the train museum
http://fortress.uccb.ns.ca/historic/s_l.html  over by Louisburg.  When I
travel, I wear a T-Shirt that says "TOURIST FROM HELL" and I stop at ALL
tourist traps.
But enough of the travelogue.  Both Canada the US insist on taxing bartering
situations.  It can be unequal.  For instance in Vancouver a Dentist traded
some carpentry work building a deck for orthodontic work on the carpenter's
kids.
The CRA found out and added the income to the individuals involved but the
carpenter got to write it off as a medical expense and the poor dentist had
it as  taxable income.
You should trade actual paper because in the future, when you go to sell the
property, you will want to add those expenses to your purchase price to
reduce the Canadian and US capital Gains tax.  When you do sell the Canadian
Property or it is deemed to be sold on your death, the Canadian government
will tax you about 12% on the first $60,000 and 22% on amounts over $200,000
with two or three graduated steps (depending upon the province) in between.
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