Flying Free

Today TaxMama hears from Patrick in TaxMama’s Tax Parlor, who says, “I have a question concerning frequent flyer miles. I have a friend (taxpayer) that is an employee of a consulting firm and had over 40,000 miles of air travel in the current year. His employer reimbursed all of the taxpayer’s transportation expenses, but allowed the taxpayer to keep the frequent flyer miles. During the year my buddy used the frequent flyer miles to buy a ticket for his personal vacation. Without the frequent flyer the ticket would have cost $1,200. Is the taxpayer required to recognize gross income from the receipt and use of the frequent flyer miles? Please explain. Thank you.”

OK folks, we all know those ‘friend’ questions are really about whom? Usually the person asking.

In this case, Patrick is just fine. Why?

Because this is one of the few free rides IRS and the code allow.

Since this was a gray area for many years, and people cringed when it came to tax time, not really knowing what to do about it…IRS issued an announcement in early 2002 defining that frequent flier miles were not taxable. And we all breathed a sigh of relief!

TaxMama announced it at the time.

You’ll find your authority giving you the free ride right on – or in the answer in TaxMama’s Tax Parlor!

And you’ll find that Tim Winship at covers this beat.

And remember, you can find answers to all kinds of questions frequent flier miles, and all kinds of other tax issues, free. Where? Where else? At

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