My inexpert opinion on the tax questions:
Originally Posted by
DennyO
This same issue was raised last year. The consensus, and my opinion, is that the most you could deduct is your basis which is zero in most cases. On the other hand, if you do have some miles for which you've paid $$$, then those miles do have a basis and you could deduct them.
Agreed, "basis" is a key concept here.
Originally Posted by
Counsellor
If you give away the miles you've won and paid taxes on, the IRS would probably agree to allow you to claim a deduction of the amount of tax you paid for them.
If you won redeemable miles as that fellow did the 1M AA miles, accepted them and paid $Y taxes on the $X AA said they were worth (which that fellow quite understandably didn't want to do), and then donated the miles to a qualified charity, then I think you could claim a deduction for a contribution worth $X, which will be substantially greater than $Y. And in the end the effect will be a wash, with the miles in the hands of the charity for whatever use they would make of them.
(The interesting question is if the charity immediately turns around and auctions the miles, getting $3X for them, can the donor of those miles then claim a deduction for a donation of $3x. If the miles in reality were worth no more than $1X when auctioned and the purchaser was in effect making his/her own gift to the charity of the extra $2X, will that purchaser rather than the original donor be entitled to take the deduction of a $2x contribution on his/her tax return. For sure, both the donor and the purchaser cannot be entitled to the $2X as a charitable gift deduction.)
If miles seem a little "funky," as they might, then substitute a valuable oil painting that someone wins in a drawing, pays taxes on, and then turns around and donates to their alma mater, which hangs the painting on its walls for a few years before selling it off and putting the monies into its endowment fund. Same answer(s)/result(s).
Originally Posted by
BearX220
If we don't want the IRS to put a value to miles for taxation purposes, we shouldn't try to put a value to them ourselves for deduction purposes. Let's not step on that hornet's nest.
Put a value to them or don't put a value to them, it won't be "we" stepping on any hornet's nest. The individual donor's deduction will either be allowed or denied, that is if the IRS takes any note of it, but I am quite confident it won't precipitate consequences for anyone but the individual taxpayer, if indeed it does for him/her.