Originally Posted by
CaliC
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. * * *.
For more information, contact The Henssler Financial Group Tax & Accounting Division
From:
http://www.henssler.com/radio/032709/tax-content.asp
This is all correct, but I think it is not relevant. This IRS position was with regard to employee compensation only. The idea there was that the IRS considered it too administratively burdensome for everyone involved to treat these employee-earned miles as taxable compensation. The IRS did not say this ruling would apply in any other context, and I think it is very questionable to infer that they would take this position where miles are paid as interest.
Originally Posted by
CaliC
Further, our own Randy Petersen has this to say about winning miles:
[I]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.
I just exchanged United miles for an F seat on Emirates, roundtrip, San Francisco to Dubai. This would cost a small fortune if you pay cash for it, even via a consolidator. Miles are property for tax purposes, no matter what the airlines, Randy or anyone else have to say about it.