Originally Posted by
dukerau
The author misses a very significant characteristic of most frequent flyer miles that undermines much of his argument. Expiration. Due to expiration, if frequent flyer miles are to be taxed, the only logical way to do so from a timing perspective is at redemption. Which means either (a) required reporting by airlines on redemptions and the equivalent cash price on that day for that exact itinerary in addition to collection and reporting of SSN of the FF account holder OR (b) self-reporting, which will inevitably result in under-reporting. Is the juice really worth the squeeze?
Not to mention the difficulty due to commingling of the miles. The IRS is really going to sit there and audit your AA account to see how many of the miles came from business travel vs personal travel, and business spend vs personal spend? What about a sign-up bonus on a CC? What if I sign up for a CC with a 50k mile bonus after $3k spend in 3 months (eg, Citi AA Platinum). Over the next 3 months, I spend $2k in reimbursed business expenses and $2k in personal expenses, and get the bonus. How many of the 50k bonus miles are taxable? Obvious answers are 0%, 33%, 50% or 100%. You could make an argument for any of those.