Originally Posted by toomanybooks
Disregarding the miles, a business could certainly argue that the fee paid was well worth it for the float and the convenience, and thus the fee would be fully deductible on its own. Businesses pay for and buy all kinds of stuff that many of us would consider extravagant and pointless and the IRS lets it through as deductible.
Technically, it seems logical that if you or your comapny are getting a business deduction for the generation of the miles, personal use of those miles ought to be taxable some way or another.
I am not an accountant, but I've followed this topic over the years, and I have never heard of anybody getting fined over this "avoidance."
It probably also comes down to the quantity of the miles involved as to whether the IRS would care much. IIRC, they have issued statements about FF miles not ordinarily being taxed.
I'm not an accountant either, so my thinking amounts to little more than speculation here, a potentially hazardous thing. I believe that the IRS did entertain the idea of taxing miles earned through business travel and kept for personal use, but backed off in the face of loud protests. Miles by paying a business' taxes or other expenses with a credit card is somewhat different from miles gained through business flying, but I don't see why the disposition of the miles earned with the credit card through spending should make a difference from the IRS's perspective if it doesn't when the miles come from flying. (Yes, I can talk myself into this! Now, can I convince my accountant?)