You do not have to "declare" (in IRS terminology, declare generally means to include as income) the retail value of the miles since you have in effect paid for them when you purchased the Nutrigrain.

The correct procedure the IRS would want you to follow is you must assign a "cost basis" to the miles and subtract this amount from your Nutrigrain purchase price to arrive at the amount of your charitable deduction.

Generally, you determine how much of the total purchase price to assign to each item (miles certificates or Nutrigrain bars) as its respective cost basis by multiplying the total purchase price by a ratio, with the the combined fair market values of the items as the denominator, and each item's specific fair market value as the numerator. This is the theory.

But in reality, we would of course use the fair market value of the miles not in their high value as being redeemed for high value awards (F/J tickets or upgrades), or for that matter, not valued as an award at all since the value of an award ticket fluctuates depending on thecircumstances.

We would instead value them by how much it costs us to aquire them via other methods. And we all know that when we perform our super duper bonus miles mileage runs, after we subtract the value of actually having gone somewhere, the cost per mile is really really low.



[This message has been edited by onedog (edited 02-18-2001).]