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IRS case for tax on value of ticket purchased with FF Miles

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eastwest101

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Here's how Citi bruised recipients on FF points by creating a tax liability:

Tax Court Sides With IRS In Tax Treatment Of Frequent Flyer Miles Issued By Citibank - Forbes

This is USA court matter.
"Bad facts make bad law" - quote of the article. Seems to be a spectacular own goal for Citibank, when you read all the background to the journalists earlier article (below the first article) it really makes you wonder what Citibank were trying to do, other than opening a massive can of worms and pissing off their customers, all other banks and frequent flyer loyalty schemes.

Maybe just over-cautious/misinformed legal and tax advice, and then they "doubled down" and ended up winning what looks like a phyrric victory in the US Tax Court. You would have to think the Tax Court will have to re-clarify or bring out some rulings to rectify what is starting to look like a legal misadventure, resulting in the inadvertent destruction of the loyalty scheme system?
 

wandering_fred

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"... resulting in the inadvertent destruction of the loyalty scheme system?
Is this an unintended consequence or a well thought out strategy. Consider how much banks spend on FF miles, mostly to be competitive with other banks. If no one could issue miles without consequences, how much money would they save by not issuing any?

(un)happy wandering

Fred
 

harvyk

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Is this an unintended consequence or a well thought out strategy. Consider how much banks spend on FF miles, mostly to be competitive with other banks. If no one could issue miles without consequences, how much money would they save by not issuing any?

(un)happy wandering

Fred
You might be right, it does throw a spanner in the works for the other banks, but personally my money would be on overzealous legal advice. Aka the whilst 99.999% of the time it's this, there is the 0.001% of the time you need to protect yourself against type advice.

It's almost a don't attribute to malice what can just as easily be explained away as incompetence type thing.
 
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