Like GregL I was the lucky winner of 100,000 United Airlines Mileage Plus Miles in the Radisson Hotels and Resorts “Stay for The Fun of It” Sweepstakes valued at $2,500 (2.5 cents/mile). For both contests we have a valuation of 2.5 cents/mile.

I have been entering sweepstakes for years. I have reported adjusted fair market valuations to the IRS in the past, which have been accepted. The key to me seems to be that the sweepstakes valuation is obviously too high and one can show a reasonable alternative valuation with supporting documentation. One should report the valuation received from the sweepstakes sponsor and put in the adjusted fair market valuation to be added in with other income. If one takes a reasonable approach, the IRS is not going to waste it time auditing you further. If one should be picked for audit, the fact that you have reported the valuation from the sweepstakes sponsor and used a reasonable understandable valuation approach should make the audit review go smoothly.

Now the valuation of miles with its many variables is interesting and a not so easy question to answer. By the way I was thinking what other sources are out there to supplement the answers already given in this thread and others from the past? Of course who is the ultimate king of miles? I have sent an e-mail to Randy Petersen via his USA Today column asking him to weigh in on the subject of the taxable valuation of miles won in sweepstakes. Whether he deems it is worthy of his attention is another matter, although I would be interested in his thoughts on the subject matter. Since no one else has mentioned comments by Randy on this subject, I am guessing that perhaps he has not addressed this subject matter in the past.

It so happens that this week I used my 100,000 miles to book a trip with United to Sydney and Cairns in Australia for 14 nights this summer (USA). It will be BOS-ORD-SYD and coming back CNS-AKL-LAX-BOS via Air New Zealand. OK I had to pay $60 to receive 20,000 points from the United VISA Card, because this neat award is 120,000 miles. I will have to pony up the air fare from one of the Australian airlines to get from SYD to CNS. The award ticket allows me one stopover or open jaw. So I picked to head for CNS. It is coach, but the price is right and an opportunity to visit a place with my son that we have never visited. Thank you United for a neat contest and to FT for helping me find out all these neat travel things I would have never known.

So how much would it have cost me to go from BOS to SYD and return? Using the same dates United come up with five options with an average price of $1,445.50 per person or $2,891 for two people. So let’s see $2,891/120,000 miles=2.4 cents/mile. In allocating for the fact that I won 100,000 miles for 5/6 of costs and miles shows $2,409/100,000 miles=2.4 cents/mile. Not an exact science here with the variables, but it seems to be a reasonable ballpark number to play with.