I can't find any specific rulings by the IRS, but I would be inclined to put my faith into someone like this:
The IRS is on record that, until further notice, it will not include frequent flyer miles in anyone's income. This includes situations in which miles are earned either for business travel or for personal expenditures. Several years ago, the IRS had attempted to tax frequent flyer miles as compensation. However, the IRS backed off after airlines, transportation trade associations and business groups complained that the their approach was unworkable. Although the IRS reserves the right to reassert the position that miles should be taxed, for all practical purposes, it will continue to exempt these miles from tax. The IRS must develop an administratively feasible way to tax these miles; otherwise, it is not a likely possibility for the foreseeable future.
For more information, contact The Henssler Financial Group Tax & Accounting Division
From:
http://www.henssler.com/radio/032709/tax-content.asp
Further, our own Randy Petersen has this to say about winning miles:
If you read the fine print of the United Mileage Plus program, these miles are not your property — they belong to United. Because the miles are not your property, it would be difficult for them to constitute a taxable base. This and a few other reasons are exactly why the IRS has no policy to establish taxation on "miles."
From:
http://www.usatoday.com/travel/fligh...sk-randy_x.htm
Doing more research, I kept running into the phrase "in-kind promotional benefits are not taxable unless converted to cash".
Cali