Originally Posted by
dhuey
Although you might not realize it, you pay for miles when you travel -- it's not a gift from the airline. Part of your fare is attributable to the flight and part is attributable to the miles. You can see this quite clearly in many examples of discount airfares that do not include miles.
This is the crux of your argument. Again, I agree with it, but many others do not.
Try this example: Suppose you buy three $99 intra-California round trips on Southwest. Under this fall's promotion, you earn a round trip award plus some flight credits. Forgetting about the flight credits, what's your basis in the award? Is it the full market value of an award (on the order of $300)? No, that can't be right because you only spent $297 and you got three round trips in addition to the award ticket. Is your basis 25% of your outlay, since you got 4 trips for the price of 3? No, because the award trip can be used for an expensive long-haul flight and the paid trips were cheap short-haul flights. In my opinion your basis in the award is somewhere between $75 and and $297. Precisely where is a judgment call.
You can see in this example that the question of basis is messy and murky. Do you really want to drag an IRS auditor into this muck?