Can I legally engrave a friends lower receiver if I do not charge them?

By definition to be considered gunsmithing you would have to be "engaged in the business"... so if I just did it as a favor would that be OK? I normally only engrave knives and promotional items but was not sure so figured this would be a good place to ask.

"A dealer is “engaged in the business” of gunsmithing, as defined in 18 U.S.C. 921(a)(21)(D) and 27 CFR
478.11, when he/she receives firearms (frames, receivers, or otherwise) provided by a customer for the
purpose of repairing, modifying, embellishing, refurbishing, or installing parts in or on those
firearms. Once the work is completed, the gunsmith returns the firearms, and charges the customer for
labor and parts."

Or could he add me to his trust and do it that way?

Thank You in advance!

My understanding is that it's fine since you're not profiting from it/it doesn't "supplement your income". Same with the ITAR crap. I do quite a bit of work for other people, but I either do it for free all around, or ask that they pay for shipping/materials in order to break even. Before anyone asks, no, I don't have people just ship me receivers and stuff to my house through the mail.

ETA: Reading it again it seems as though the lower is already a registered NFA item. If that's the case I have no idea if it's okay or not.

That is what I assumed, figured it would be ok since I am not "in the business" of engraving firearms.

Stamp has not been approved yet so that adds another layer of confusion

There are several way this could be legal. If the friend brings the receiver to you and remains with it, then it is still in his possession. He could do the same at any engraving business. It becoming a Title II firearm won't change this scenario.

If you both live in the same state, one may (in most states) transfer a Title I firearm to another resident without any paperwork. This would include leaving it with you for however long while you engrave it. Then you could hand it back. Obviously NFA registration changes this scenario.

Yes, if he adds you to the trust with possession authority, then that's fine too. He'll have to wait until he has no pending transfers to modify his trust.

Exactly the answer I was looking for, never really thought about the remaining with it part and since it only takes about 15mins to run that will be the case.

TY KitBuilder!

Even when the stamp comes back, it doesn't change its status.  
It's only an SBR when assembled as such.  If he hands you a stripped lower with no upper/no barrel, that's all it is.

ATF's "once a machinegun, always a machinegun" rule is only for machineguns, the ATF doesn't apply it to any other Title 2 firearms.

It depends. Yes, NFA registered Title II firearms are treated as Title I firearms when assembled as such (except, as you noted, MGs). The problem is when you get into transfers. Sure, I can re-configure my registered SBR into a Title I firearm and sell it, without paperwork, to another resident of my state. I may choose not to notify BATFE of the transfer, which is also perfectly fine. Now the buyer owns a Title I firearm.

Now suppose I buy it back later. I want it to be an SBR again. My engraving is already on it, and as far as the BATFE knows, it's still registered to me, so what would be the problem?

Unless you know BATFE's answer to this question, there could be a problem with the temporary transfer of a registered SBR in Title I configuration. I'd prefer not to ask their opinion, and just stick to one of the obviously acceptable scenarios.

Um, just do it and don't tell anyone.