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Old Feb 25, 21, 9:14 pm
Original Member
Join Date: May 1998
Posts: 1,113
Originally Posted by sethb View Post
It seems clear to me that MS for cash profit is taxable, because cash profits are always taxable.

MS for airline miles, hotel status, etc. is not taxable, because those items are not taxable.
I think that is the conclusion that a lot of us would come to.

Not because miles canít be taxable (Citi famously issued 1099s a few years ago for miles earned from opening bank accounts in certain circumstances), but because many of us would argue that miles/points donít have much value.

In that same $1,000 or so Manufactured Spending transaction generating the $37 or so of profit with a 5 percent cash back card, if someone now used the Citi Mile-up card and got 2,024 AA miles after incurring $12.90 of fees, many of us would argue that those 2,024 AA miles arenít worth any more than the $12.90 of fees. It is just a way of purchasing travel at a discount compared to the normal retail cash price. If you spend enough in $12.90 fees per 2,024 AA miles and you want to go to Europe in Business Class, maybe you finally get to 115,000 AA miles and hope there is award availability. The miles are likely worth what you pay for them in fees in a Manufactured Spending transaction. To me, they basically function as a coupon that you may or may not ever redeem. But it is a coupon you have to purchase with the knowledge that it may or may not ever really be relatively valuable. And you canít resell that coupon once you buy it - it has no cash value.
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