
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SUNDAY, May 9, 1993                   TAG: 9305090280
SECTION: HORIZON                    PAGE: F6   EDITION: METRO 
SOURCE: BARBARA SHEA NEWSDAY
DATELINE:                                 LENGTH: Medium

FREQUENT-FLIER AWARDS RUMORED TARGET OF IRS

This may be the year to trade in that triple mileage you've been racking up on business trips for a family vacation in Hawaii. Rumors are flying that it may not be long before the IRS starts collecting income tax on frequent-flier awards.

The IRS confirms that the majority of frequent-flier awards claimed every year are taxable as "other income" under the present IRS code, but says it has no national collection plan in the works. "That's not to say that in any particular office the issue can't be raised," an IRS spokesman added.

Concern started growing after recent publicity about several Florida business travelers ordered by a local IRS office to pay back taxes on reimbursements they had received from their employer for frequent-flier awards they had turned over to their company.

"That audit is merely a harbinger of things to come," says Stan Dale, a professor of finance at the University of Phoenix who for years has been tracking the ins and outs of frequent-flier programs in his monthly newsletter Mileage & Points. In the April issue, he quotes a Treasury Department official as stating that the new administration will "pursue all available means of revenue [tax] generation."

This clearly means mileage awards earned by business travel and used for personal trips, said Dale: "It's a billion-dollar-a-year windfall that the administration is not going to overlook." He said IRS audits are uncovering taxable frequent-flier-award income on a regular basis, but in the past the agency has had a problem establishing fair market value of free travel earned courtesy of frequent-flier programs. His research has convinced him that a new IRS system going into place next January would give the agency that capability, Dale said.

by CNB