This is OT, but: taxing FF miles/rewards would be illogical. The IRS doesn't consider rebates and "cashback" as income because the only way to earn those is to spend money in the first place (well, ALMOST the only way, since I'm not counting all the creative purchasing, returning, and financing that is discussed on FT and other similar boards). These are, in effect, reductions of the sales price and not true income (you have to spend money to make some or all of it back), and those costs are borne by the merchant providing the rebate and/or the credit card company providing the cashback. (Of course, in many states sales tax is charged on the pre-rebate price, but that's a different issue... as is the fact that you earn credit card cashback on the entire amount, including sales tax.) Yes, in certain situations you could end up making more on the rebate than you spent on the product/service, but those instances are rare enough that they wouldn't be worth trying to tax... not to mention the paperwork involved by multiple parties to actually track what a given person has "earned" through the rebate.

In any case, I think FF miles (and subsequent rewards) would be treated in the same manner - as rebate-type transactions that are not taxable, rather than as taxable income. FF miles are paid for by the consumer one way or another, either through the purchase of airline tickets or other goods/services (e.g. partner bonuses). So, I don't think there's any logic in taxing them, if considered in this regard.

Yes, I know the IRS isn't always logical. :-D