Check out this site, I thought selling airline miles was illegal??


http://www.sellyourpoints.com

It's not illegal. It is against the rules of most major airlines & hotels.

The IRS won't look too kindly upon such a business either. Which may hurt all frequent traveller programs, if the IRS decides that they need to tax this "resource".

I hope they go out of business soon, or get busted by the airlines.

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"If life doesn't offer a game worth playing, then invent a new one."
-Anthony J. D'Angelo

Would be interesting if this was set up by the airlines so that they could get the people offering their miles to provide the needed information (e.g. name, FF#, address-or legal jurisdiction) directly.

I'd love to get rid of several hundred thousand nearly-worthless miles. I'm going to check it out and see what mechanisms they use to put one over on "The Man".

How are ff miles any different than selling extra stuff at a yard sale?

If you sell your extra stuff at a yard sale, it normally wouldn't create taxable income because you'd be selling it for less than you paid for it (at a loss). If you did for some reason sell some item for more than you paid for it, you do indeed have taxable income. Note this is true even if you sold a bunch of other stuff at a loss; they don't offset.

But frequent flier miles are different. You paid nothing for them, so you have no tax basis, so your entire proceeds represent taxable income. You could argue that the miles were included in the cost of the ticket and therefore you DO have basis, but since the tickets are sold for the same price to people who aren't members of the mileage program, you'd probably lose that argument.

Lou(the toe)Groza - Are you expressing this opinion because you are a tax professional, or are you just guessing?

Well, I'm expressing the opinion because I'm an opinionated horse's ... but I am a CPA, although not a tax specialist.

Hey Tino,
Several hundred thousand? Why not cash in for travel awards and give them to your friends.
Rita

"But frequent flier miles are different. You paid nothing for them, so you have no tax basis, so your entire proceeds represent taxable income. You could argue that the miles were included in the cost of the ticket and therefore you DO have basis, but since the tickets are sold for the same price to people who aren't members of the mileage program, you'd probably lose that argument."

However, everyone has the "right" to join these programs, it's their choice if they don't-and arguably their loss-so therefore we ARE paying for the miles. It's just that the people who do join get the benefits and those who choose not to don't. Kind of like using coupons at the grocery store-they are available to everyone and they are not considered income even though you are paying less than those who don't use them.

Kind of like using coupons at the grocery store-they are available to everyone and they are not considered income even though you are paying less than those who don't use them.

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I don't think that is a good analogy. A better analogy would be SELLING grocery store coupons and that would definitely create taxable income to the seller, assuming the seller didn't pay for the coupons in the first place (or paid less than the selling price). Not everybody clips coupons, although everybody can, and those who sell them have income as a result.

My guess is that you would not be selling these tickets anyway. I would think that you will be booking the ticket using your miles, but in another travellers name. You will then be paid some cash from the company, who have inturn collected more cash from the customer whose ticket you just booked using your miles. Not sure if this works on all the ff programs, as I dont know what the rules are for booking lfights for friends and family...just a guess

Ummm, I think he was kidding.

I don't think that is a good analogy. A better analogy would be SELLING grocery store coupons and that would definitely create taxable income to the seller, assuming the seller didn't pay for the coupons in the first place (or paid less than the selling price). Not everybody clips coupons, although everybody can, and those who sell them have income as a result.

LouGroza is 100% correct on the tax issue.

FF miles are not taxable when received from FF programs (see IRS Announcement 2002-18). That reinforces the notion of you having no cost basis in them. Selling anything in which you have no cost basis produces taxable income.

Will the IRS show up at your door if they found out you sold a friend an award ticket for a few hundred dollars? Probably not (although you'd probably get taxed if the money your friend paid you showed up in a bank account audit). Will they show up at your door if you are listed as a mile seller with a mileage broker? Very likely.