Chapter 2 Problem 72
Latrell recently used his Delta Skymiles to purchase a free roundtrip ticket to Milan, Italy (value $1,200). The frequent flyer miles used to purchase the ticket were generated from Latrell’s business travel as a CPA. Latrell’s employer paid for his business trips, and he was not taxed on the travel reimbursement. Use an available tax research service to determine how much income, if any, does Latrell have to recognize as a result of purchasing an airline ticket with Skymiles earned from business travel.
Is Latrell’s personal use of frequent flyer miles obtained from business travel taxable?
IRS Announcement 2012-18
No, Latrell does not have to recognize he personal use of frequent flyer miles obtained from business travel. He used his frequent flyer miles to purchase an airline ticket, If Latrell had converted the frequent flyer miles to cash or another form of liquidation, a taxable income would have resulted.
IRS Announcement 2012-18 states that frequent flyer miles earned by taxpayer’s business travel is not taxable income if in-kind benefits. This ruling does not apply to benefits that have been converted to cash.
Chapter 3 Problem 49
Bendetta, a high-tax-rate taxpayer, owns several rental properties and would like to shift some income to her daughter, Jenine. Bendetta instructs her tenants to send their rent checks to Jenine so Jenine can report the rental income. Will this shift the income from Bendetta to Jenine? Why, or why not?
Under the assignment of income doctrine, sending the checks to Jenine does not shift the revenue to Jenine. To shift the income to Jenine, Jenine would have to earn the income. For this problem, Jenine would have to own the rental property.
Chapter 4 Comprehensive Problem 40
Marc and Michelle are married and earned salaries this year (2009) of $64,000 and $12,000, respectively. In addition to their salaries, they received interest of $350...