I'm not an attorney, let alone (heavens forbid) a tax attorney, but generally speaking, there is no tax liability associated with division of property in a divorce. The general theory is that each party owned half of all the "stuff" when married, and that each party owns all of half the "stuff" after the divorce. The I.R.S. doesn't want to get into whether the division results in two equal halves or not. Your friend should consult her own attorney about the tax implications of what she is doing, but I would be very surprised if he told her that there might be taxes to pay on cash in lieu of miles, points, or any other asset.

In my mind, it shouldn't matter to us whether she is interested in using the points or not, the same as it shouldn't matter if the person who ends up with the house intends to live in it afterwords or intends to put it on the market and get more suitable digs. If the two parties agree on how to divide their assets, who are we to question it? If they don't agree, the court will impose a division, which I don't recommend.