Originally Posted by plinth857

I believe the IRS considers the purchase of an airline ticket a contract for carriage between locations PLUS the potential for another flight if the airline fails to provide the original flight. It is seen by the IRS as a "bundle of services", thus any compensation provided is part of that bundle and thus not taxable.

This article explains it pretty well:

http://viewfromthewing.boardingarea....ation-taxable/