And Citi was the only one, AFAIK, that did that. So 1 financial company, out of the hundreds that exist, decided to create a mythical 1099 with WHAT THEY THINK is the correct value of miles. Just because they list AA miles as being worth 2 or 3 cents doesn't mean they are correct. That would be an easy IRS challenge. For starters, I would ask Citi to document what miles were worth when they first started issuing miles, and then walk everyone through the change in valuation whenever AA devalued miles. Somehow I suspect the end value is NOT going to match up to what Citi put down on the 1099.

As far as not owning the miles, I would simply ask Citi if it violates their rules to sell AA miles and TYP points. They would answer yes. I would then ask if they've ever confiscated points and/or closed someone's FF account down? They would answer yes. Both of which would show that travelers don't actually own their miles/points.

There's a donkey here who would really like his hind legs back.

I tire of this subject. I have surrendered when wrong (Chris and TMM's technical argument about whether data in (for example) AA's database is "owned" by the account holder).

The rational posters have also reasonably yielded to me although, at this point, I have to agree that taxing employee-paid FF benefits is probably not feasible. Grudgingly, IRS is right here.

Unrelated to this, I think the answer to Tchiowa's original question is easy. Offer to repay the difference. If your performance suffered due to the forced downgrade, as a manager, I get that. If the cost:benefit to the company does not justify repayment, so much the better for you. Either way, you have done the right thing.

1. If the high credit card spend is manufactured spending, I say let the IRS stick it to the person (not making myself any more popular on FT). If the credit card spend is on legitimate, not-business related purchases, to me, that does belong to the spender. To tax those gets into double-taxation that I do not understand or support.

2. Chrisl137 has provided a persuasive argument why taxing employer-paid FF benefits is probably not feasible. That being said, provided that your employer reimburses you, I do not think that the fact that you were temporarily responsible for the business-related expenses would obviate your tax obligation, if taxing were feasible.

3. The annual costs of most cards is chump change. I'm talking about employees leveraging employer-paid miles into one or more $10K or $20K tickets for personal use. If feasible, that should be taxed.

But what about the middle ground (and what most people I know have all their points from) which is relatively high expense-able spending (flights, hotels, meals, client gifts etc.) that costs them nothing, but earns them points?

I find the principle of manufactured spending to be abhorrent and, although this would be an unpopular position at FT and presumably not legally valid, I perceive "buying" stuff with cash value with the intent to return it at close to the purchase price (no/minimal cost to the manufactured spender) for the purpose of getting points/miles to be fraud. If I were engaging in this practice, I would be worried about, one day, being charged with fraud.

If the money is legitimately spent, I think benefits could accrue but they should accrue to the person who paid the bill.

This will probably make me more unpopular at FT but it is who I am.

I look at credit card points this way: the merchant who accepts credit cards has that built into his cost model. The point(s) I get for using a card represents a portion of the revenue generated by the bank from the merchant off of the transaction. That revenue - the cost of transacting via credit card - bakes in the cost to the bank of my Starpoint or whatever.

In other words, if I walk into Chipotle and pay cash for a burrito, I'm still effectively paying for a burrito plus 7 Starpoints. That cost is already bundled into my burrito. Therefore, when I use my Amex and actually *receive* the 7 Starpoints, I'm simply buying them. Ergo, not the creation of new assets or income.

Of course, by the same token I totally realize that every single Flyertalker here (me included) would utterly lose our sh** if Chipotle actually charged us to use a credit card (either with a fee or a "cash discount"). So yeah, I'll admit we want to have our cake and eat it too: we know deep down that cash payers are subsidizing the Starpoints, but I still don't think it's a case where income is generated.

Pinniped. Getting a benefit on your card because it is part of the program (FOR SOMETHING ACTUALLY PURCHASED AND USED) is, ethically, totally acceptable.

On the other hand, please do not say that you advocate MS as I understand it. "Buying" items easily convertible to cash on a rewards credit card, then turning around and redeeming the "asset" at no/minimal cost. I'm sure this has been discussed ad nauseum on FT and there are undoubtedly staunch proponents who think there is nothing wrong with this. I just learned of this despicable practice and I consider it fraud. Whether the courts consider it fraud is irrelevant to me; it is fraud.

How did you find FlyerTalk? Based on all your posts, I'm having trouble understanding why you are here? You seem to have the opposite viewpoint of almost all FTers.

Right, and even a cursory examination of that last sentence shows just how silly the "rebate" distinction truly is. If, e.g., I sign up for a Citi Prestige card and spend $3,000 in the first three months, Citi will give me 50,000 Thank You Points, which have an explicit value of 1.6 cents each (or $800) at AA. Since the swipe fee on $3,000 is maybe $90, classifying the $800 bonus as a "rebate" doesn't pass the laugh test. But because the IRS makes the rules, it's considered a rebate nonetheless — at least for now.

"Almost all FTers" are pro-manufactured spending? I'd be surprised if "almost all FTers" even know what it is.

Not just that but Bevin also thinks FF miles/points should be taxed. How many FTers do you think agree with that? Only a fool.

Keep it classy.

I am here because, while I am not a heavy traveler, I appreciate the tips that I consider to be ethical. I also enjoy reading some of the less-travel related forums like dining. Regarding that many of my positions do not represent the majority of FTers, most good forums (and I consider FT to be one) don't have any problem with dissenting opinions provided that the debate does not become personal.

Your calling me a fool in a later post I think pushes that boundary but if the mods find it acceptable, it is acceptable.

I'm not going to re-read the discussion, but I didn't get the impression that he wants loyalty program benefits to be taxed; it seemed like he was simply making the common-sense point that such benefits have actual value — regardless of the programs' legalese and the IRS' somewhat whimsical rulings and definitions.

If someone steals a Hyatt free-night certificate from you, you're not just going to shrug and say, "Well, the fine print says the coupon is only worth 1/20th of one cent, anyway. No big deal." These things have value.

After reading all these off topic posts that talk about taxation of points/miles, I have a question.

Please point out if I am wrong, but taxation occurs in more than one form, not just revenue based like the IRS. There are state and local sales tax on purchases; govt. taxes issued for things like airline tickets, gas purchases, import fees, etc.; bed taxes for hotel rooms?

Don't we all pay taxes on the flights purchased with these miles? I don't fly much, but I have used awarded miles to fly to Asia in the past. Even though the tickets cost me only miles, I had to pay all the govt. fees and taxes associated with these tickets at the time of purchase. I believe the same with the "free" rooms earned through Hotel Programs.

So to the people who consider these miles/points as income, I say we still pay our fair share of taxes, just to another "bucket." We shouldn't be taxed twice as some govt. people think we should.

Now can we get back on topic about the ethical question posed by the OP?