Tax Memo

Facts Latrell accumulated shop at nib miles from his care conk as a CPA in which his employer pay for the business trips, and he was non taxed on the travel reimbursement. He recently use his Delta Skymiles to purchase a free roundtrip air hose slating worth $1,200 to Milan, Italy. Issues Is an employees private use of shop at gamin miles realise as a result of business travel rateable? Authorities IRC Sec. 62(a) IRS promulgation 2002-18 ConclusionNo, an employees personal use of sponsor broadsheet miles make as a result of business travel is not taxable. Because Latrells used his habitual flyer miles to purchase an airline ticket preferably of redeeming his frequent flyer miles for cash, he does not need to accept the regard as of the airline ticket in raw income. Analysis IRC Sec. 62(a) provides the deductions from gross income that are allowed for figure adjusted gross income. IRC Sec. 2(a)(1) states that gross income includes ornament benefits such as fre quent flyer miles accumulated from business travel. IRC Sec. 62(a)(2)(A) states that the reimbursed expenses of an employee related to his or her performance of services under a reimbursement or other expenses allowance constitution with the employer are allowable deductions in increase to those allowed by IRC Sec. 161 through IRC Sec. 196. Since under IRC Sec. 62(a) frequent flyer miles are categorized as deductions to gross income, they are not taxable.IRS announcement 2002-18 also states that frequent flyer miles or other in-kind promotional benefits, such as a free airline ticket, earned by the taxpayers business travel will not represent taxable income. However, this ruling applies only to in-kind benefits and not to benefits that discombobulate been liquidated or converted to cash. Therefore, since Latrell used his frequent flyer miles to purchase an airline ticket instead of redeeming his frequent flyer miles for cash, he does not need to include the value of the airline ticket as taxable income.