Z1954

You are correct. Just got a response from Citi. They say it was for 25,000 miles to open a checking and savings account, not the AMEX.

JATR4

Don't think any of the Oneworld airlines fly from GSO. There are flights available from Charlotte but it is inconvenient.

Have 3 upcoming personal trips already booked in addition to lots of Delta and United miles.

Using BankDirect because of the ultra-low interest rates. I would never pay the prices for the hotels I am booking with cash.

thecybersuz

I left B of A with their games and I am now going to do the same with citibank. For the reported value of $750. I could have flown first class on a domestic flight, this is absolutely ridiculous and insulting. To earn $750. in interest income I would have needed to tie up about $70,000 in cash with citi. This is so convoluted and random, it doesn't matter how many actual miles you received from the promotion they just assigned a $750. price tag.

So while I admit I am a miles whore I am DONE with this, it is not worth it, the overall tax impact far exceeds the benefit.

I hope people walk from citibank, I hope the back lash hurts.

josephstern

For 100 years, at current rates. Even with a CD, that would take a while.

bocastephen

Everyone should just file revised 1099s with 1c/mile valuations and push it back on Citi to prove their value estimates - make it as hard and troublesome as possible for them.

Andy2

I'm a little confused as to what you are suggesting. A recipient of a Form 1099 cannot file a corrected or amended Form 1099 himself. Only the original issuer of the Form 1099 can do that.

There is a process whereby the recipient can contact the IRS and have the IRS contact the sender of the Form 1099 in an attempt to resolve a dispute. At one time, the IRS completed a Form 4598 as part of this process. One poster said that the IRS now does this by writing a letter instead. If I recall correctly, another poster indicated that the IRS representative suggested that the recipient contact the sender of the 1099 directly and wouldn't write the letter.

Back on Post 152, I posted a link that mentions this process. Here is an additional link that details the process when the Form 4598 was used:

http://en.allexperts.com/q/Tax-Law-Q...escrepancy.htm

If the IRS does complete the letter mentioned in the article linked to Post 152, it will cause Citi to respond and that would be a bit of a hassle for them. However, Citi is likely to respond that they believe they are correct and simply provide details as to how they arrived at their amount. This will effectively make the IRS a direct party to the dispute which may or may not be adviseable. For instance, many recipients do not feel that 1 cent per mile is the correct valuation as you suggested.

If you read the article in the link to Post 152, you can see how to dispute the value by entering a negative amount on a line of your tax return if you feel that is appropriate. Several posts, including one by JATR4 mention some similar tax preparation methods of getting to the result you believe to be correct.

Jesperss

Actually this could be a smart move by Citi.

Weed out all those who are just signing up purely for the bonus points. Cutting the low hanging fruit.

nsx

No, it harms Citi. It devalues the incentive they offer. It's especially damaging to Citibank because other banks do not issue 1099's. Citibank pays the ariline about the same per mile as Amex does, but the customer receives much less benefit from the Citibank mile.

If this is a conspiracy, it's the stupidest one I ever heard of. Citibank makes the airlines look smart.

Jesperss

If you donate miles to charity you're not allowed to take a tax deduction:

http://www.smartertravel.com/travel-....html?id=13454



Discuss that.

Andy2

You will notice at the bottom of the article that the commentor notes that a charitable contribution is available for miles that were purchased. Those miles have basis equal to the purchase price.

When a person has miles that are included in taxable income, the recipient gets basis equal to the amount included in taxable income, so a charitable contribution should be available if those miles are donated.

The practical problem is coming up with a system that would prove the miles with basis were the miles donated.

Of course, if a person takes a subtraction to value the miles at $0.00 on the tax return, no basis would exist. I'm not sure this article adds or subtracts anything to the 1099 issue.

sdsearch

To do that it would have explain that up front.

In case you missed it, a lot of the debate is because Citi either didn't explain up front how much the tax would/could be (just a generic statement that "you will be liabile for any taxes owed, if any" which says nothing useful) or hid it so well that most people didn't find it.

So it'd be one thing if Citi had changed the promos to spell this out. That would weed out people.

But finding out only by getting a 1099 in the mail, in the next calendar year, is way too late to weed out someone. By then they've already done it!

So I don't see how doing it "silently" could have been a plan to weed out anyone or anything.

And, btw, Citi knows how to weed out already, with "this offer is only valid for..." language which all Citi credit card applicants have been seeing for years (and which changed its phrasing a couple years ago at the same time that quick churning of Citi AA credit cards stopped being possible).

pinniped

Nearly all miles are purchased in one way or another. I either buy them bundled into airline tickets, hotel stays, rental cars, credit card purchases, or other purchases.

It's very rare that I receive a random phone call saying "Hey Pinniped, we called to give you free airline miles in exchange for nothing. Thanks! Have a nice day!"

But I agree...the practical problem is establishing basis, at least for flown miles. For rental cars, hotels, flowers, credit cards, etc. it's easier to demonstrate a non-mileage-included street value for the product. I can prove that I can buy a dozen roses for $15 without miles. I can show a 2% rebate credit card. I can priceline a rental car and get materially the same product. Etc.

But airlines don't generally unbundle the miles from the seat. Although maybe (and I stress maybe) you could twist those awful "Mileage Multiplier" offers to your favor. If the airline shows you a price for doubling and tripling your miles from a flight, it's not that crazy of a logical step to reverse it and show an effective basis for the regular miles. @:-) We Flyertalkers can poke holes in that pretty quick but in a more rational world it makes more sense.

Of course...if I go hard down the road proving that my miles do have value for the purposes of charitable contributions, then I can't really use all of my "they aren't property; they have no value" arguments in other parts of the tax return.

Sort of off-topic, but I always figured that the best way to donate travel to a charity was to figure out how many miles/points you wanted to give and then call the charity offering up the award(s) that those miles would cover. Then you'd donate a flight or a hotel room and could provide documentation for the FMV of that.

SirGareth

In order for something to have a fair market value, an actual market would have to exist. Frequent flyer miles may not be traded or sold; therefore they have no value. They may have value to some people but not in an open market.

There are many examples of this:

Salesmen may work hard to not only earn their W-2 reported commissions in totally fungible cash, but they also work hard in order to meet quota and be invited to the company sales convention in Maui or Tahiti where they may relax and be wined and dined at great company expense in a 5 star resort hotel. The salesman had to work very hard to get all this grand treatment but it has no value since it cant be sold and therefore cannot be reported as income on either a 1099 or W-2.

People who work for airlines are also granted passes for themselves and for their family members (parents and children) These passes allow employees and family members to fly free on a space available basis (usually in first class). These passes are equally not reportable as income on a 1099 since they may never be bought or sold in an open market - just like your citibank miles - ergo no FMV

I agree that citibank's 1099 Misc should be reported, then an equal amount stating that the amount was in error and worth no more than a free airline pass issued to an airline family member - ie $0.00.

Andy2

Your examples and analogies are very good. Strictly speaking, the reasons that the benefits you described are nontaxable is that they fall under a tax exception called working condition fringe benefits. Although there may be no specific exception for miles received from opening a bank account, the frustrating thing about Citibank is their inability to apply common sense. The tax laws are complex enough without Congress or the Treasury Department trying to write a law for everything.

If Citi Cards issues me 25,000 miles that are protected from tax under the rebate rule and Citibank gives me 25,000 miles for opening a bank account, how can anyone at Citibank think I should be taxed on a value of $625 for the miles received from opening of the bank account just because a strict application of the rebate rule doesn't fit perfectly. Do I really look at the 25,000 miles Citibank gave me differently than the 25,000 that Citi Cards gave me if and when I use them?

So the burden is on the taxpayer to enter a negative amount on his tax return to get to the correct value. Examples like the ones you provided are useful in getting to the desired result.

bocastephen

$250 is a big hit - but for $50 (in many jurisdictions), you can take Citi to Small Claims Court over them issuing a 1099 against something that has no real value - since it will cost them thousands to answer each suit, they would probably get the message soon enough even if they win or the suit is dismissed.

Recall the potential horror American Honda is facing from a likely barrage of thousands of Small Claims suits over the Civic Hybrid, being spearheaded by an activist in SoCal who did just that and won her suit.

Recall Sean Connery's advise in The Untouchables - and select the bigger weapon to bring to your fight.