Frequent-flier mileage awards: recent federal developments.
Tax Executive › Vol. 50 Nbr. 4, July 1998
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Summary
Taxation
The IRS in Technical Advice Memorandum (TAM) 9547001 created controversy regarding airline frequent flier mileage awards and the IRC section 62(a)(2)(A) exclusion for expenses related to the performance of services. The IRS treated an employer reimbursement plan as nonaccountable under IRS regulations due to employee retention for personal use of such awards which the IRS ruled were to be included in their income. The possible generalized extension of the TAM has created political and taxpayer debate.See the full content of this document
Extract
Frequent-flier mileage awards: recent federal developments.
The IRS Position
Although airline travel frequent-flier award programs have been in existence since 1981, the Internal Revenue Service has only recently begun to address the federal income tax treatment of awards earned by employees for business travel and retained for personal use. To date, no direct authority or specific guidance has been provided concerning the procedure for valuing travel awards. The IRS has provided guidance to the airline industry regarding the Form 1099 reporting requirements for frequent-flier mileage awards. In Private Letter Ruling 9340007 (June 29, 1993), the IRS ruled that an airline was not subject to the information reporting requirements of section 6041 with respect to its frequent-flier program. The private ruling is significant because it formally states the IRS's position on the taxability of frequent-flier miles. If the miles were earned from personal travel paid for by an individual, th...See the full content of this document
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