- Take a position on whether or not employees who travel for business should be required to include the value of frequent-flyer miles in their gross income. Support your position with examples or other evidence.
- Explain how your position changes if the employer reports to the IRS the value of the employees' frequent-flyer mileage.
Red Corporation operates a facility that produces ethanol. The ethanol is produced by the fermentation of starches released from milled biostocks. The primary business purpose for the ethanol is as an alternative fuel source to gasoline.
- Discuss the possible asset class options that Red Corporation may use for the ethanol.
- Identify the class you would recommend to Red and explain your rationale.
The problem is the value of the miles, not the acquiring of free miles itself. According to IRS rules, "Gross income is all income you receive in the form of money, goods, property, and services that is not exempt from tax." If the taxpayer is single, their gross income must be at least $9,500 to file a tax return. Because we're discussing a businessperson who travels, we can reasonably assume that this is someone who is paid a decent salary or wage and receives a W-2. The person would therefore automatically have to file a tax return. If we go by IRS regulation, because the first condition is met of having to file taxes, the miles would have to be included in gross income because they are considered a good that would not be tax-free.
Another consideration here is that many ...
The solution discusses each situation presented involving frequent flier miles and ethanol asset classes.