Originally Posted by
Andy2
Has AA offerred any lotteries or prizes in which the lucky recipient received 100,000 miles from them? If so, I wonder how they valued the miles when they issued the 1099. I bet the terms and conditions specified the value of the miles. If AA does offer such prizes, awards, contests, I bet they will be displeased with Citi for asserting such a high value.
Yes. And the lucky winner eventually turned down the prize because the value AA reported to IRS would make him owe tens of thousands of taxes.
If you google it you may be able to unearth the story - that was like 5 or more years ago.
Although this is not the same story I thought about, right here on FT this thread may offer you some hint:
In 2002:
http://www.flyertalk.com/forum/miles...nner-aa-4.html
1099 issued for $20,000 for his 1 million miles.
Another thread that is dated in 2005, AA valued the winning at 0.25 a mile.
http://www.flyertalk.com/forum/miles...eepstakes.html
So there, I guess I have already told you so... that this IS the FMV AA used and IRS accepted.
How much you value the miles does NOT matter, because it is a subjective valuation - can be 0 can be 1.00 whatever you prefer... but a value at the price the merchant (in this case, AA) sells to customer at REGULAR price, is what the FMV is established in the eyes of IRS.
You can keep theorizing whatever scenarios and how ever you want on the utility of miles, or the "moral" ground of Citi, it does NOT matter. There is indeed an Long Established FMV on AA miles and Citi seems to use the correct one!