David Elkins (Netanaya College School of Law, Israel), Taxation of Barter Transactions: Theory, Combination Transactions, and Interest-Free Loans:

This is the English abstract of a book recently published by the author in Hebrew entitled Taxation of Barter Transaction: Theory, Combination Transactions, and Interest-Free Loans (Tel-Aviv 2012).

The book (and the attached abstract) first discusses the taxation of barter transactions from a theoretical perspective: the relationship between the taxation of barter transactions and the realization principle; and the identification, classification, and quantification of both income and expenses in barter transaction. The author presents a model to analyze the tax consequences of barter transaction, and he compares and contrasts his model to those in common usage, the 'notional income and expense model” and the 'avoided expenses' model.'

Subsequent parts discuss two specific types of barter transactions. The first is known is Israel as 'combination transactions,' in which a developer constructs a building on property owned by someone else, with the developer and the landowner eventually dividing between them either the apartment units or the proceeds from their sale. The second is interest-free loans. Here the book goes a bit beyond barter transactions. While interest-free loans to service providers are barter transactions (services in exchange for use of money), gift loans and interest-free loans from corporations their shareholders or from shareholders to the corporation are not. Nevertheless, a great deal can be learned by considering the similarities and, more importantly, the differences between these various loans.