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Even shares on "gross profit" can fail: it can be beneficial for the publisher to give away the product for free. I've had this happen to a J2ME app, which the publisher gave away for free in exchange for advertising (they were building presence and reputation by this).

Another trick seems to be bundling - "buy this collection of things and you get thing x for free". So profits for selling thing x would be zero.

I am sure there are many more tricks like this...



If there was an exchange, there was consideration, and this seems more like a barter, not a free give-away.

I bet a good lawyer could have made a case for you.

I believe the IRS would consider the advertising to have some monetary value, which is what your gross profit fee would be based on.

The fair market value of goods and services received in exchange for goods or services you provide must be included in income in the year received.

http://www.irs.gov/taxtopics/tc420.html




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