Originally Posted by
Boraxo
Actually you can report the correct FMV on your tax return, but you will get a notice when the IRS computer finds a mismatch to the 1099. You can then contest the value reported by Citi. I understand people have had some success in doing so but dealing with the IRS is never a pleasant process.
If a person enters the gross amount that matches the 1099, and then enters a negative amount labeled something like "FMV Prize Adjustment", the IRS computer finds the gross amount and does not appear to automatically send a matching notice. Of course, a manual review might still result in a letter requesting an explanation. But many years ago when this was a hot topic, many FTers did in fact use this technique and no one appears to have received a notice. Most of the posts indicated that they reduced the value by some amount, no one directly reported reducing it all the way to $0. And this is not really a topic limited to miles. People in the studio audience caught those ridiculous "bling bags" from Oprah and were horrified at receiving 1099s for the gross retail price of junk they never used. That is where most of the guidance on using a "FMV Prize Adjustment" arose in the literature on this topic. The issuer of the 1099 gets the greatest protection under the law by using a high value, but it is not very good customer service.