The IRS has issued "Announcement 2002-18." It states that they "will not asset that a taxpayer has understated ... federal tax liability by personally receiving or using frequent flyer miles or other promotional benefits (such as incentives from hotels and car-rental agencies) related to the taxpayer's business."

There is one "BUT," whereby they state that it WILL be income if the miles or other promotional benefits are converted to cash (as is possible by, for example, redeeming Hilton points for gaming chips).

Doakes