Old Feb 25, 07, 6:33 pm
Join Date: May 1998
Posts: 6,658
Originally Posted by pinniped View Post
The main reasons it benefits us: the aforementioned tax reason for one - the IRS can simply pretend miles don't exist -
I think I know what you're getting at, but the IRS really doesn't pretend miles don't exist.

- When the airlines or FF programs sell miles to a "partner" like a rental car company, the Feds charge an excise tax on the sale of each mile (and some of the "partners" then pass that directly through to the individual).

- And I believe the IRS considers any money received in the sale of such miles by the FF program to be income subject to tax (after expenses).

- If you win miles in a sweepstakes, the Feds are right there at the door demanding taxes based on the "value" of each mile won.

- And I suspect that if you were paid in miles for some work you did, they'd want their income tax cut of that, too.

What the IRS did, back about six years ago, was to say that they were not going to require the individual to report as income the miles he/she received from business trips paid by the employer, or the trips or whatever goods or services the employee received in redeeming the miles.

However, the IRS particularly noted that the decision did not apply to cases where the individual took the miles received from business flights paid by the employer and converted them to cash or cash equivalents (through, for instance, selling the miles or a ticket obtained by redeeming the miles).

So, really, rather than pretending miles don't exist, the IRS has carved out only a "special case" in which miles are not considered taxable.
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