Letters to accountant

I need some tax advice for our 2012 return. As you know I have invested in good camera equipment and software and photo printers, but you had said it is hard to write off all our sailing travel around the world as a business loss for James Thomsen Photography since I had no income to show for my photography. Well, things have changed and I have sold more than 50 photos this year. One was a framed print to my brother for $10.

Over the past couple of weeks I have sold more than 50 photo prints on the remote islands of Aneityum and Tanna in the South Pacific country of Vanuatu. Most were for passport size photos required for the local soccer teams to compete in the Vanuatu National games. I have also sold a number of family portraits and prints of children.

So far I have received more than 20 kilograms of bananas, 28 grapefruits, 36 papaya, 40 chockos, 10 kilos of snake beans, a couple of dozen eggs and some handwoven baskets. The photos of the village Chief I gave as a gift, so I guess that will be charged to marketing.

Photography sales in Vanuatu - Response from accountant

Appears that your photography business has taken off and you have quite a bit of gross income to report; bartering for goods or services is the same as collecting cash. I am sure you can provide fair values for the items you traded for so you can report that as gross income. The IRS may still view this is a hobby, however, if your income does start to exceed your expenses, well, you are just going to have to report it on your tax return. By the way, what is 40 chockos worth these days...?

Also, since the income is earned outside the US, you would be able to claim the foreign earned income exclusion. Further, I suspect you are also reporting this income and filing tax returns in the country(s) where you are performing these photographer services. Oh, and if the exclusion does not work out, you would be allowed to take the foreign tax credit for any double taxed income (bananas, papayas, et al).

Hmm, what did you trade with the Vanuatu Gov't to pay your taxes? I am sure the IRS will accept that as a "same as cash" payment...

Photography sales in Vanuatu - Part Three

Thank you for the advice. I think we will have an issue here as my business seems to be booming. Yesterday, after two hours of portrait photography with 51 men from the Jonn Frum village at Sulfur Bay, I returned to Tenaya with a kayak loaded with baskets, ceremonial feathers, woven mats and kava root. We will take the kava root to shore where some local boys will chew it, mix it with water, strain through an old T-shirt, and serve to a group of us yachties so I will just charge the kava to advertising.

Your firm will also need to do some research for us. As I told you, a large percentage of my income has come from the John Frum village. I am not sure how familiar you are with this belief (Google it) but it is the dominate religion on Tanna. Some call it a cargo cult. They believe the people of Tanna are spiritually connected to the people of the United States and that someday the riches of America will come to Tanna. They still raise the American flag, the Marine Corps and Navy flags and the Red Cross flag (most sacred) which were given to their grandfathers by American troops during World War II in appreciation of the help the people of Tanna gave the Allies.

Because of this very special relationship and prophesy, I assume the IRS has some special tax free/free trade agreement with the John Frum religion. In addition, perhaps government grants for equipment and money are available? If so, we will happily arrange receipt and distribution. Finally, when invoicing us for your time, please convert the amount due to woven baskets as that will make payment easier and faster.

Thank you again for all you help and advice.

Photography sales in Vanuatu - Part Four

Mr. Walwick
08/21/2012, Port Resolution, Tanna, Vanuatu

We will get right on that research! My firm may need to arrange for me to come to the John Frum village in order to better acquaint our firm with the taxation customs and the impact they may have on your individual income tax situation. My firm indicates that instead of charging you a fee, payable in baskets, you could provide food and lodging aboard Tenaya for the period of time I would need to conduct my investigation and discovery. While you ponder that, I will get going on the preliminary research.

Photography sales in Vanuatu - Part Five

Since our tax situation has become much more complicated than I planned, I think your visit will be quite helpful. The customs of the John Frum people are very different than any group we have ever encountered so I assume their tax laws are also confusing. I have a general idea about the worth of pigs, kava and baskets but beyond that I am lost.

You are welcome to stay aboard Tenaya and we have an excellent collection of food. Yesterday Katie made a traditional meal called laplap by grating manioc then mixing with coconut milk and baking (in our oven instead of under hot stones in the ground), as well as a curry of snake beans and chocko, all served with a New Zealand chardonnay. Your lovely wife will find it all very healthy and delicious. We are living off the kumara, yams, taro, chocko, snake beans, papaya, grapefruit, tomatoes and eggplant. You will be impressed how we have cut our expenses.