Conference back40::soapbox

To be exactly clear about what this means:

If you are going to DECUS next week,
and you fly on an airline which grants you frequent flier miles,
then
Digital must declare the reimbursement for the full value of your
ticket to be taxable income.
and
must report it as such on your W-2 form.

You will be taxed on the full value of the ticket to DECUS.

You can deduct the price of the ticket
minus the value of the frequent flier miles,
but to do that, you'll have to show what the value of
the frequent flier miles are.

Until then, the entire value of the ticket is income.

Furthermore, assuming Digital pays you $50,000 and your wife's employer
pays her $50,000, and you file jointly.

Then, only business air travel above $2,000 per year will be deductible.

/john

    This is why the IRS should be eliminated. They can't stop at real
    income, they try to impute income wherever they can. It's totally
    bogus. The IRS oughtta be subjected to RICO statutes.

    
    
    
    Amen, Mark.
    
    
    Mike

    I'll get it back.

    I do not believe that the IRS will ever try to enforce this.  For one,
    the frequent flyer miles have to be converted to a ticket before it
    becomes a taxable item.  So how will the IRS keep up with all the
    details.  They would have to compare your frequent flyer statements
    with your employer travel vouchers (only the receipt identifies the
    airline) with the miles you earned on your own personal trips with the
    miles you earned from your personal credit cards with the list goes on
    for ever.  Then they will have to figure out if the mileage you are
    cashing was: 1.) all company miles, 2.) all personal miles, 3.)
    combination of company and personal, 4.) and whether the ticket should
    be priced at: 1.) full fair for that flight, 2.) the cheapest ticket
    for that flight, 3.) cheapest flight if alternative airline could have
    been used.  Then the Airlines will sue the IRS because the IRS is not
    enforcing the same rules on the hotels and rental car companies who
    provide bennies for frequent use.  Oh yes, don't forget the IRS will
    have to deal with the upgrade certificates for business and first class
    seating.  Let me complicate it even more.  You fly on Delta 30,000
    miles, purely personal.  This qualifies you for Medallion status ans
    the 25% bonus.  Now you fly, say, 20,000 miles for the company.  You
    get a 25% bonus of 5,000 miles for this business travel.  However, it
    was your purely personal travel that qualified you for the bonus, not
    the business travel.  Now is the 5,000 mile bonus taxable or not?  See
    the problem.

    .2
    
    ...and to think that the Supreme Court has ruled that Congress cannot
       define what "income" is...apparently the IRS has taken it upon them-
       selves.
    
    Crap. crap. crap.  Turn 'em all into McDonalds' workers.

    .7
    
    Don't worry for the I.R.S. It'll be YOU trying to figure out how to
    declare it.

>    <<< Note 599.7 by SCAS02::GUINEO::MOORE "PerhapsTheDreamIsDreamingUs" >>>
>    .7
>    Don't worry for the I.R.S. It'll be YOU trying to figure out how to
>    declare it.

Barry - you're replying to your own notes again.

    
    Oops. .6
    
    Besides, noone wanna play with me !

    The value of FF miles unclaimed should be 0 until converted.  The value 
    of the miles be realized once converted into a ticket at the going rate 
    for for that fare.  If you had $2,000 in business travel in the
    example and received 10,000 FF miles, you could deduct the $2,000 for
    the ticket and would not need to claim anything for the miles earned as
    you had not realized them yet.  If you used those miles towards a plane
    ticket or an upgrade etc. then you would need to claim that as income
    when you converted the miles into a material gain.  This of course is
    mostly speculation on my part but it still sucks.  
    
    Brian

I've always believed in addressing this problem by being 
only an infrequent flyer.

    
    {cringe} .5
    
    {Sam Kinnisson screaming noises}

    Oh, what else is next?  Getting taxed on credit card "rebates"?  Taxed
    on FF mile when you use an AMEX, Diner's Club, USAir, United etc. card?
    
    Brian

    	I heard on a finance radio talk show (Bob Brinker, perhaps) that
    	unredeemed frequent flyer miles are beginning to grow into an
    	overwhelming liability for airlines, and that they will soon be
    	instituting programs to get them to expire sooner or otherwise
    	not be honored at all.
    
    	If the IRS taxes a person on unredeemed miles and then the airline
    	discounts or voids them, should the taxpayer get reimbursed from
    	the IRS for the taxes already paid on them?
    
    	On the flip side, if the IRS waits until redemption to tax the
    	miles, can a person claim them as long-term capital gains?  :^)
    
    	Go to a consumption tax instead of an income tax, and all these
    	questions become moot.

Tax TB!

 If you drive a car car
 I will tax the street
 if it gets too cold cold 
 I'll tax the heat
 if you try to sit sit
 I'll tax your seat
 cuz I'm the tax man
 yeah the tax man
 and you're working for no one but me...

    re. 7
    
    Wrong.  If the IRS does not have a record(s) that you flew on a FF
    ticket and how the points were earned for that ticket, then there is no
    way they can enforce such a rule.  There must be a way to enforce it or
    it will not work.  Unless companies, airlines, rental car agencies,
    hotels and credit card companies are all required to start reporting
    every detail of your business with them, then I would not report any FF
    expenditures on my tax return.  And you can bet that you will know if
    all of the above mentioned industries are required to do this because
    they will all request your SSN when you do business with them.  It will
    never happen!
    

    Every time you use your credit card to buy something, your SSN can be
    found.  This can be tied to you FF numbers(s).  It would be very easy
    to designate in a data base how your ticket was paid for if you flew 
    anywhere.  
    
    Brian

    .2
    
    > This is why the IRS should be eliminated. They can't stop at real
    > income, they try to impute income wherever they can.
    
    
    "Impute" income?  Bullhockey.  Frequent flier miles aren't free income? 
    Wake up and smell the toast.  I agree that the IRS is often way
    overboard, but in this instance they are right on the money.  Pun
    intended.

    .10
    
    > The value of FF miles unclaimed should be 0 until converted.
    
    The value of your paycheck should be 0 until you spend it.  Su-u-ure. 
    It's potential value, and so are FF miles.

    Maybe they should also apply the income tax to grocery coupons while
    they're at it, how about the difference between MSRP and the sale
    price, ...

    One major problem that I would have with going to strictly a
    consumption tax is the penalty imposed on people who have done the
    right thing and saved when the government/tax-code was telling them not
    to.  A (true) flat-tax on earned income only is a better way.

    -- Dave

    re. 18
    
    It would be easy in a relational database, but the IRS's Intergrated
    Data Retrieval System (IDRS) which is used in the IRS Service Centers
    are Unisys 2200/900 systems running the Unisys DMS 1100 CODASYL
    (Hierarchial) database.  The applications are wriiten in COBOL.  This
    makes it much more difficult to make associations.  In addition, there
    are NO major data reporting, data mining and EIS systems that support
    DMS 1100.  The IRS uses old, obsolete systems to process taxes.  In
    addition, I do not believe that Congress is in any mood to start
    requiring tax payers (voters) to register their SSN with airlines, car
    rental companies, etc.  And to add to all of that, I don't think, by
    law, that you can be made to reveal you SSN to these companies.  It
    will never happen!
    

    But what is earned income?
    
    The stuff we see in our paychecks each week?  The billions some people
    make without working for anyone because of their investments?  Stock
    options FF miles?
    
    Consumption taxes hit only when you spend your cash, rewarding you for 
    savings, or only buying groceries, pharmecuticals and used clothing. 
    (my personal three that should be exempt)
    
    meg

    FF miles have no value until they are converted into some kind of
    material gain.  The money in your paycheck does.  In the case of FF 
    miles, they have no value to them unless you sell them or use them 
    toward a travel service of some sort.  If I am not mistaken, but I 
    certainly may be, the coupons state there is no cash value associated 
    with them.  
    
    Brian

    .24
    
    What value, pray tell, does the money in your paycheck have?  If you
    keep it in your wallet, it has no value.  Only when you do something
    with it does it have value.  FF miles are the same.  They are a free
    gift (income) to you, to use if you so desire.

re:       <<< Note 599.20 by SMURF::BINDER "Eis qui nos doment uescimur." >>>
>    > The value of FF miles unclaimed should be 0 until converted.
>    It's potential value, and so are FF miles.

Isn't there a problem insofar as the following -

   Harvey and Paul each have x000 frequent flier miles and decide to
   use them for a trip from Boston to LA. Paul makes his reservations
   early while a special is being run by the airlines and gets his
   tickets with a face value of $250. Harvey waits until the last minute
   when top dollar is being charged for tickets - $1000.

   Should the IRS impute as follows -

    a) Paul has $250 of imputed income, Harvey has $1000 (sounds reasonable)
    b) Paul and Harvey each have $250 of imputed income (in your dreams)
    c) Paul and Harvey each have $1000 of imputed income (betcha they do it)

>    I do not believe that the IRS will ever try to enforce this.  For one,
>    the frequent flyer miles have to be converted to a ticket before it
>    becomes a taxable item.  So how will the IRS keep up with all the
>    details.

Read it again.

The IRS has just said that they'll take the tax up front when your employer
reimburses you for the ticket; it's then your responsibility to document what
part of the ticket was a business expense and what part was taxable.

/john

>                                 FF miles are the same.  They are a free
>    gift (income) to you, to use if you so desire.

Unlike money, you can't use them until you've accumulated a whole bunch.
I have a few FF accounts that will probably never accumulate enough miles
to have any value.

    .28
    
    > Unlike money, you can't use them until you've accumulated a whole bunch.
    
    How is that unlike money?  Try buying something for a penny these days. 
    Only when you have accumulated a bunch of pennies do they have usable
    value.

    Let me complicate this even more for the IRS.  I cash in some FF points
    and receive my coupon good for one free round trip domestic ticket.  I
    then make a reservation on December 1, 1995 for a round trip from
    Atlanta to Denver.  The flight will take place on December 1, 1996.  I
    go to the airline office and pick up the ticket.  Between the time I
    picked up the ticket and the time I actually flew (one year later), the
    average price of domestic tickets in the U.S increased by 25% overall. 
    Now do I report on my tax return the price of what such a flight would
    cost on 12-1-95 or 12-1-96?  Also, when I am sitting at home in April
    of 1997 working on my 1996 tax forms, how am I supposed to find out
    from the airline what the cost of a Atlanta-Denver flight would have
    cost on 12-1-95?  Hell, their not going to tell you, cause the agent
    will not know.  It will be a nightmare of details.  It will never
    happen!

>    How is that unlike money?  Try buying something for a penny these days. 
>    Only when you have accumulated a bunch of pennies do they have usable
>    value.

I can pool my penny with a bunch of friends' pennies, buy a candy bar, and
cut it into little pieces.  Try doing that with FF miles.

    everytime you rent a car, you must show them a valid driver's license. 
    This can be linked to your SSN.  If you use a credit card, your number
    can be linked back to your SSN.  Wouldn't the IRS simply require these
    companies to report on your financial activities the way banks must
    now?  
    
    Brian

    
    	You don't need your SSN on your driver's license.
    

    The IRS allows you to give any individual a $10,000 tax free gift every
    year.  American Express allows me to transfer my miles to anyone I
    like.  So I give you $10,000 worth of FF miles and you give me $10,000
    worth of FF miles, tax free.  They I go where I want to and so do you,
    tax free.
    
    

    .31
    
    You report the price as it was at the time you contracted to buy the
    ticket.  This is not rocket science; it's just like purchasing Digital
    stock on the ESPP.  A price is quoted as of December 1, and the stock
    is actually issued some days later.  It matters not that the stock
    price may in the interim have doubled - or halved.  You pay the quoted
    price.

    >"Impute" income?  Bullhockey.  Frequent flier miles aren't free income? 
    
     No more so than any other "buy 1, get 1 free" type of offer. I don't
    believe that such incentives have any business being taxed. Should the
    IRS tax you on the imputed income when you go to Anderson Little and
    buy 2 suits for the price of one? If not, why not? If so, then should
    they tax you every time you get a discounted price? If not, why not?
    It's the same thing. Frequent flyer miles are just like coupons or
    discounts. None of them should be taxed. The fact that you can't use FF
    miles until you have accumulated enough of them does not in any
    material way alter what they are- they are a discount, an incentive to
    buy here vs via the competition.

    .35
    
    But FF miles, while similar to a free gift, are not a free gift.  They
    are granted you in exchange for your having purchased passage on the
    airline in question.

 .31 oooh, that was a good one.

    
    	Anderson Little makes you buy a suit to get the 2nd suit free,
    	so that's not a gift either.
    

RE: 599.32 by SMURF::BINDER "Eis qui nos doment uescimur."

What price?  The full fare,  almost no one ever pays price?  Then frequent
flyer miles are worthless,  if you pay taxes,  as you can fly cheaper than 
28% of full fare with advance purchase fare.  


Phil

    When are they going to start taxing Christmas presents?
    
    Or do they do that already, and I've been breaking the law
    all these years...
    
    Chris

    .31
    
    Clever retort, but you still had to pool your pennies before you could
    acquire the desired thing of value in exchange for them.

    RE: .40
    
    No, that's inhumane.  

re .43:

So what?  The airlines don't let me pool my FF miles, so they're worthless.

    RE: .23 (Meg)

>    Consumption taxes hit only when you spend your cash, rewarding you for 
>    savings, or only buying groceries, pharmecuticals and used clothing. 
>    (my personal three that should be exempt)

    Let's say that Grandma's being saving all these years for her
    retirement AND paying income tax on the money when she earned it, paid
    income tax on the measly interest that she earned on it, and now you
    want to change the bulk of the taxes from income tax to consumption tax
    so that you can tax her again when she buys things.

    Sorry, that's wrong, and it's why I think converting from an income tax
    to a consumption tax is wrong.

    -- Dave

>What that means is that reimbursement for the full cost of the ticket would
>have to be counted as part of the employee's income and reported by the
>employer on the worker's W-2 form.

>The employee, on his or her tax return, could then deduct from income the
>cost of the ticket, minus the value of any frequent-flier miles converted to
>personal use.

I will go back to my earlier point about enforcement, the IRS will have to
know that you used FF points for a flight and they will have to know the 
source of the points and the value of the flight at some point in time.  
Unless there is some kind of detailed reporting system implemented by all 
companies that issue FF points and redeem FF points, and these results are
submitted to the IRS, it will never happen.

>    buy 2 suits for the price of one? If not, why not? If so, then should
>    they tax you every time you get a discounted price? If not, why not?
>    It's the same thing. Frequent flyer miles are just like coupons or
>    discounts.

The IRS has no intention of taxing you for FF miles earned on tickets you buy
for yourself.

The tax accrues on FF miles converted for personal use from tickets bought
by your employer as a business expense.

/john

re: .46, Dave

But over 99% of the taxpaying public doesn't fit the same model as Grandma.
It's hardly rational to penalize the entire tax base with an oppressive
system for the sake of Grandma.

    
    	If it saves 1 grandma ...
    

    but Mom, (in my case) still gets taxed when she pulls money out of her
    IRA, and penalized if she doesn't, so she is still being taxed on the
    money in there and the pitance of interest, and if she tosses what she
    doesn't need into a savings account or other interest bearing thingie,
    she still gets taxed on it, so it still isn't fair.  
    
    On the other hand, the local underground investor, is still getting his
    cash tax free, and can spend it on whatever he wants with no one
    getting anything out of it, except the first time when the cash passed
    from a taxed person to the first untaxed one.
    
    meg

   Re: Note 599.47 by MIMS::SANDERS_J
   

�I will go back to my earlier point about enforcement, the IRS will have to
�know that you used FF points for a flight and they will have to know the 
�source of the points and the value of the flight at some point in time.  
�Unless there is some kind of detailed reporting system implemented by all 
�companies that issue FF points and redeem FF points, and these results are
�submitted to the IRS, it will never happen.

   All the IRS has to do is create a new regulation that airlines must
   report all tickets issued as a result of FF miles.  Since this is for
   tax purposes, the airline can require the purchaser's SSN (or SSAN
   for govt. forms).  The airline then reports this to the IRS who then
   assesses a tax on it.  The IRS the puts the onus on the purchaser to
   prove it's not taxable income.

The IRS has already created the new regulation:

If your employer allows you to accrue FF miles on business travel, you pay
tax on the full amount of the business travel, and work it out with the
IRS later, with you doing the only recordkeeping.

Your employer, when reimbursing you, will have to require you to satisfy
the employer that there were no FF miles issued in conjunction with the
trip.  If you can't prove that to your employer, then your employer must
report the reimbursement as taxable income.

The new IRS regulation taxes you on the value of the _business_ travel,
not the free miles, until you demonstrate that there is a difference.

/john

    
    	Shhh, John.  If you say it any more, they might actually
    	*get* it.
    
    	Karen
    

    RE: .47

>I will go back to my earlier point about enforcement, the IRS will have to
>know that you used FF points for a flight and they will have to know the 

    You're forgetting that with the IRS you're guilty until proven
    innocent.  The IRS doesn't have to do anything besides haul you in. 
    You have to do the proving.


    RE: .49

>But over 99% of the taxpaying public doesn't fit the same model as Grandma.
>It's hardly rational to penalize the entire tax base with an oppressive
>system for the sake of Grandma.

    Agreed.  That's why I would go for a flat tax and eliminate all
    loopholes, deductions, etc. ... and eliminate the bulk of the IRS.

    RE: .51

>    but Mom, (in my case) still gets taxed when she pulls money out of her
>    IRA, and penalized if she doesn't, so she is still being taxed on the

    IRA's are different.  Grandma (Mom in this case) wasn't taxed on the
    money when she put into the IRA and she wasn't taxed on the interest or
    earning that acrued within the IRA.  Theoritically, her tax rate is
    lower now when she's pulling the money out of the IRA than it was when
    she put it in.

>    On the other hand, the local underground investor, is still getting his
>    cash tax free, and can spend it on whatever he wants with no one
>    getting anything out of it, except the first time when the cash passed
>    from a taxed person to the first untaxed one.

    "Underground investor"?  Are you implying drug dealers?  The black
    market is a problem with any form of income tax ... but then the drug
    dealer won't be charging a value added tax on the drugs sold....

    Am I willing to let the black market go tax free to keep from double
    taxing responsible savers?  I don't know.  I'll have to think about it.

    -- Dave

    P.S.  

    
    	Dave, it's bad enough you used a "P.S." in an editor, but at	
    	least you could have put something there instead of leaving
    	it blank.
    

>    	Dave, it's bad enough you used a "P.S." in an editor, but at	
>    	least you could have put something there instead of leaving
>    	it blank.

    Sorry about that.  I started to put a P.S. in, realized that I could
    reword the thought before I signed it and exited without realizing I
    left the P.S. in.  I did see it after exiting the editor, but I usually
    need to spot two major typos before I'll extract/delete/reenter the
    note.

    -- Dave

    P.S.  Yes.  I think I will have a McDolphin, thank you.

    
    	OK, that explains it.
    
    	[Is that with or without ketchup?  And do you want fries with
    	 that?]
    

           <<< Note 599.23 by CSC32::M_EVANS "runs with scissors" >>>

>    Consumption taxes hit only when you spend your cash, rewarding you for 
>    savings, or only buying groceries, pharmecuticals and used clothing. 
>    (my personal three that should be exempt)
    
    	Ditto.  Let's party, Meg.  We found common ground!  I even agree
    	with that limited list of exemptions.
    
    	In addition my support for the consumption tax is because it will
    	eliminate the entire portion of the IRS that handles personal
    	income tax, the structure that makes the personal income tax codes,
    	and the bureaucracy that supports enforcement/compliance for the
    	personal income tax codes.
    
    	Less government all around.  I support that eventhough it means
    	the elimination of my current income tax deductions including
    	mortgage, charitables, and the fat chunk right off the top for
    	my dependent deductions.  The way I have structured my affairs
    	today, I probably pay less in income taxes now than I would under
    	a consumption tax.

       <<< Note 599.25 by SMURF::BINDER "Eis qui nos doment uescimur." >>>

>    What value, pray tell, does the money in your paycheck have?  
    
    	The government (of which the IRS is a part) backs its value.
    	You are guaranteed its value when you choose to use it.
    
    	FF miles are fickle and can be withdrawn before you have a
    	chance to benefit from them.

    Joe,
    
    Unfortunately gettng rid of the income tax and the IRS will probably
    never happen.  The government has used the income tax for so much
    social engineering it is ridiculous.  
    
    I might or might not.  I have major expenditures coming up in the next
    year on the house, and the mortgage deduction comes back (ick) but I
    wouldrather pay for the construction stuff and not have to account for
    what I do with my kids and everything else to some uncaring human robot
    in Utah.  
    
    
    meg
    
    

    Just to help me switch from being a flat tax propoent to a consumption
    tax proponent, which form of consumption tax would you advocate: 
    national sales tax or a value added tax.

    The major difference (as I have heard it explained) is that a national
    sales tax would be akin to what most states have now. 

    A VAT on the other hand only taxes the difference between a seller's
    purchasing price/creation cost and selling price.  

    For comparison, if you sold your old car to a non-relative for less
    than you originally paid for it, then the sale would be subject to a
    national sales tax but would not be subject to a VAT (you didn't add
    any value to the car as evidenced by the lower selling price).

    With a VAT you would have more paper work (showing selling price minus
    costs and implying more wiggle room) and you add tax to the product at
    each middleman step.  With a national sales tax you would be taxing
    used items as well as new ones.

    With either, the cost of buying a house just went up.

    -- Dave

    Why should used clothes be exempt from a national consumption tax? 
    Right now there is a big market for certain vintage used levi's.  If
    the year and condition is right, we could be talking about $100's for
    one lousy pair of denims.

    Now if you're talking about Goodwill Industries, Salvation Army, Mom &
    Pop average garage sale, then why tax any of it (except of course to
    prevent someone from abusing the system)?

    -- Dave

    How come every time I see FF in this string, I think of Steve Leech?? 
    :)

    	The exemption on used clothes is there to allow someone with
    	a poverty-level income to exist relatively untaxed.
    
    	I think that their rent should also be expmpted.
    
    	Interesting comment on the cost of a house going up.  That
    	would definitely need to be worked -- perhaps exempting some
    	base amount (average cost of housing nationwide?) from taxation.
    	That would, in effect, work like a luxury tax.
    
    	But you also have to realize that in tandem with the increased
    	costs of items, you get a much nicer take-home pay.  Look at your
    	paycheck and add in your fed tax and see how that would look to
    	you.

    Joe,
    
    I am not sure housing costs could be averaged on a national level. 
    Remember the cost of a starter home here, compared to CA or MA, or even
    Chicago for that matter.  There are other parts of the country where
    housing costs are significantly less.  
    
    rent should be tax exempt in a sales tax, as it is income, rather than a
    good or service.  Notice that the sales tax in this state doesn't touch
    rent, or for some reason real-estate sales, although it does kick in
    (heavily) on vehicles.  However, the lumber, bricks, cement, nails and
    all the component pieces of the house are taxed.  
    
    meg

    Ok, let's see what exemptions do we have so far:
        1.  food
        2.  perscribed drugs
        3.  used clothes
        4.  rent (but only if the person certifies that their a certain
            level of poor)
        5.  houses (except for the difference between the national average
            and the amount paid)

    How long have we banted the idea in the box?  And we already have five
    exemptions in the works?  I guess we better not get rid of those IRS
    bean counters too fast.

    RE: .66  (meg)

    Ok, I can live with ALL rent being exempt and all real-estate.

    Now is it a national sales tax or a value added tax?  (and why?)

    -- Dave

    No you tax the pieces parts of the house going up, just like is done
    today.  After over 10 years of constant remodeling on an older home I
    am familiar with the tax on each nail.  
    
    Currently in CO rent is not sales taxed.  It is income after
    depreciation and all that happy game-playing stuff you have to do with
    irs form 10whatever.  Instead only tax the landlord when he or she buys
    something with that money.
    
    the neat thing about the consumption taxes, is that even the very
    wealthy and the underground economy winds up buying things, be it a
    trip to the local body pierceing/tatooing salon to a new or used car,
    to a flight to Paris, to a new bauble, to the occaisional meal
    out....... you get the picture.
    
    It does away with the need for the captal gains tax, interest and
    dividends tax, income tax, the assumed income for waitrons and other
    service professionals tax on tips, I haven't figured out SS yet, as I
    know they are as likely to refund my paid in money so I can invest it
    in a mutual fund, as Joe Oppelt and I are to find common ground on
    abortion and euthanasia.
    
    meg

    Oops, note collision.
    
    I prefer a straight sales tax, other a VAT.  the salestax is going to
    be less cumbersome, formwise, and the less complicated something is,
    the less room for loopholes.  
    
    It also puts an end to "nanny-gate" situations, if I can figure out
    what to do with SS.  
    
    meg

    Just crusing through.
    
    Write off the whole cost of the ticket and donate the miles to
    charity to fly some sick kid to a hospital.  It's a wash.
    This also assumes the person who got the airfare ITEMIZES deductions.
    
    -or-
    since the IRS treats you as a bizness, become one.  Now the goodies
    don't have to go on schedule a in the 2% "other expenses" box,
    they can go somewhere else and be completely written off.  And then
    some....
    
    MadMike

	I just got back from Singapore, they have an interesting tax system.

	There is no actual "income tax" as we know it. They have a comsumption
	tax called GST. The GST is 10%. Everything from hotel rooms, to
	resturant bills, clothing, electronics, jewlery, and camera equipment
	(just those things that I purchased) carry the tax.

	The only "tax" on income is a 20% set-aside for retirement. The 
	employee pays 20% of his income into a fund, and his employers
	matches it. This fund is designed to be available at retirement,
	but can be "tapped" to buy a "flat" or to educate your kids.

	Of course Singapore has negative unemployment (they have to
	import workers to fill all the jobs they have) and they have 
	absolutely no welfare system.

	Not sure that this system would work in the US.

Jim

       Yes, but do the waiters in restaurants act rudely by
       speaking Chinese among themselves?

                     <<< Note 599.73 by CALLME::MR_TOPAZ >>>

>       Yes, but do the waiters in restaurants act rudely by
>       speaking Chinese among themselves?

	Not that I noticed. I found just about everyone in Singapore
	to be universally polite.

	Occasionally folks would drop into Mandarin, but they would
	always apologize for doing so and explain what they were talking
	about afterwards. Not their fault that I can't speak the language.

Jim

    A caned society is a polite society?

>	Not that I noticed. I found just about everyone in Singapore
>	to be universally polite.

It's illegal to be impolite in Singapore.  The dreaded PP (Politeness Police)
enforce the law with vigor.

To get back to the topic, the IRS is apparently backing down from their
ruling.  In any case, they say, it currently applies to only one company.

 ZZ   Yes, but do the waiters in restaurants act rudely by
 ZZ   speaking Chinese among themselves?
    
    I hope not.  I especially hope the manager doesn't have a scowl on his
    face and yell at the waiter who is 20 feet away.

Well, today it appears that the IRS is retreating from their original
statement.  But I think they'll be back once they've worked out the
whole process.

The IRS was requiring the tax to be collected _initially_ on the full value
of the ticket which resulted in the frequent flier credit to your personal
account.

The $500 price of that ticket was _initially_ considered to be income because
you received the full benefit of the $500 towards your frequent flier account.

The IRS hadn't gone any further than this yet w.r.t. how the individual
employee deals with this.  In this ruling the benefit received was the full
value of the ticket, since you received $500 worth of frequent flier miles,
which may be worth more or less than $500 when cashed in.  (More?! you say?
Yes.  I can show you a case where a personal trip I took costing about $400
earned me enough miles in a special promotion to be worth two $500 tickets.
It was a personal trip that obtained the miles, so it was a non-taxable
promotion, but if it had been a business trip it would have been taxable.
There are other cases where the benefits received are the same or greater:
fly now and get a companion ticket to use later, for example.)

The tax lawyers who were commenting on this indicated that the employee
would be able to take a business tax deduction (subject to the 2% of AGI
threshold) for the difference between the price of the ticket used to
accumulate the miles and the value of the ticket obtained from the miles.

But can this be done at the end of the year (with the IRS now notified in
some way that FF miles have been accumulated, requiring later reconciliation
with some new form not yet designed) or can it not be reconciled until those
miles are actually used some years later, requiring the filling out of
amended tax returns for previous years?  That hasn't been determined yet.

And once you get around to computing the difference, what is the taxable
value of the ticket received?  The last time I received a pair of round-trip
tickets to Europe from TWA was about eight years ago, and summer excursion
fares were about $800 per ticket.  But the FFB ticket did not have the
restrictions of the $800 tickets: it was fully refundable (for the same
number of miles used to obtain it) and didn't have a 30-day restriction
(I stayed five weeks) and didn't have a no changes restriction.  Such a
ticket bought on the open market probably would have cost about $1800.

/john

    I said all along in my many replies to this string that "It will never
    happen!"
    
    Why was I so sure?  Because I worked for the IRS for seven years.  For
    those who continued to say such things as "all the IRS has to do is
    .........", you flat out don't know how the system works.  You clearly
    don't know didly squat about IRS tax processing, their computer
    systems, and how all that crap works.  I will not hold that against you
    since, unless you worked there, you could not possibly know.  But as to
    your total ignorance of the current political climate in Washington, I
    must say many of the repliers to this string showed complete and total
    ignorance.  The IRS gets its funding from Congress.  If you cannot
    figure out the connection between Congressional funding and the fact
    that IRS commissioners and deputy commissioners have to go before
    Congress and state their case for funding to enforce tax regulations,
    then you are truly clueless people.  I rest my case.  It will never
    happen.  

    In other words, "I won't blame you for being ignorant but I will
    certainly take full advantage of this opportunity to beat you severely
    over the head with your ignorance."
    
    

    I can't resist beating up some more on those that said "all the IRS has
    to do is ....."
    
    The Republicans, who control the committees of both the House and
    Senate are trying to:
    
    1. Cut taxes by $245 Billion
    2. Reduce the size of the Federal government
    3. Reduce government regulation that needlessly raises the cost of
       doing business for companies.
    
    I think this agenda is known to most people who even make an attempt to
    know what is going on.
    
    Those of you who think that the IRS can, without any oversight by Congress,
    just raise your taxes and impose more reporting requirements on the airline,
    hotel, rental car and credit card companies (who all have lobbyist),
    are truly clueless people.  You must live on another planet.
    

>Those of you who think that the IRS can, without any oversight by Congress,
>just raise your taxes and impose more reporting requirements on the airline,
>hotel, rental car and credit card companies (who all have lobbyist),
>are truly clueless people.  You must live on another planet.

But this isn't a new tax.  It is income; there is no question about that.
Congress has already authorized the IRS to collect taxes on income and
has already authorized them to require income to be reported.  Reporting
methods are completely up to the IRS.

/john

RE: 599.82 by COVERT::COVERT "John R. Covert"

> Reporting methods are completely up to the IRS.

Completely?


Phil

IRS intent to tax frequent fliers raises hackles
----------------------------------------------------------------------------

(c) 1995 Copyright Nando.net
(c) 1995 Associated Press

PITTSBURGH (Nov 29, 1995 - 02:32 EST) -- Fresh misery, some predicted. An
ill-considered reversal of efforts to simplify government, others suggested.
But most shrugged and assumed the taxman had figured a new way to announce,
"Gotcha!"

The source of irritation among business travelers at Pittsburgh
International Airport was a memo revealed Tuesday that indicated the
Internal Revenue Service was eyeing one of their most treasured perks: the
frequent flier miles accumulated on brain-fuzzing business trips and applied
to personal travel for pleasure.

Imagine the new revenue for the IRS.

Imagine, too, the irate business fliers, who would pay more taxes because
work expenses may be deducted only to the extent they exceed 2 percent of
adjusted gross income.

Imagine the paperwork, the cost of which seems sure to outrun any tax
benefits for government coffers.

Later Tuesday, the tax agency indicated it may be rethinking its advice.

Airlines award passengers frequent-flier miles, or travel credits, to keep
them loyal and encourage additional trips, which add more miles toward free
future travel.

While the IRS has long held that frequent-flier miles earned through
business travel are taxable, it has never tried to enforce the liability --
seeming to bow to the daunting bookkeeping task entailed.

Then, in the "technical advice memorandum" drawn up for one unidentified
company that lets its employees keep frequent-flier miles, the IRS advised
the firm it should report the full cost of business flights -- as income --
on its workers' W-2 income tax forms.

While the employees could then deduct those additional thousands of dollars
of reported income -- as business expenses -- they would have to subtract
the value of any frequent-flier miles accumulated for personal travel.

"It just sounds like another ... thing to make everyone's life more complex
and miserable," Gloria McBride said Tuesday as she waited in Pittsburgh for
a flight to Albany, N.Y.

McBride, who lives in Kennebunk, Maine, takes a business flight at least
once a week as field director for the Fresh Air Fund, a New York-based
nonprofit group.

Taxing frequent-flyer miles would be impossibly complicated, suggested Glenn
Taylor of Chicago, an executive with Merck and Co., a drug manufacturer.

"I get frequent-flyer miles with my Visa purchases," Taylor said, citing a
common variation on how consumers gather miles toward free flights. "How do
you differentiate? Is it business or personal?"

Peter Denes, who flies dozens of times a year for his job, said, "It's the
exact opposite of what I thought government was trying to do.

"I feel sorry for our company because we have a lot of people traveling.
We're going to need to get another person just to handle this," said Denes,
who works for Keller Technology, a manufacturer of custom machinery in
Buffalo, N.Y.

Jim Medlock, finance director of the American Payroll Organization, based in
New York, said that if the IRS memo were to be applied nationwide, companies
would have to keep track of how many miles their employees accumulate, how
many they use for personal travel and how much those miles are worth.

"It would be an enormous record-keeping burden to force companies to figure
out," agreed Grant Wirth, a partner in D.G. Sisterson and Co., a Pittsburgh
accounting firm. "It could be an administrative nightmare if they pushed
this through and put this in effect on a national basis."

To avoid bookkeeping trouble, Medlock said, companies could either forbid
their employees to accept frequent-flier miles, or refuse to let them use
them for personal travel.

He said his organization, which represents 13,000 payroll administrators
nationwide, would urge the IRS to not base its overall policy on the
specific memorandum. He said companies often use such memos to gauge "the
back-room thinking" at the IRS.

IRS spokesman Frank Keith emphasized the memo applied to only one company
and didn't mean federal tax-gatherers had changed policy. But he also noted  <--
that the IRS had always said taxes were due on frequent-flyer miles earned   <--
on business trips but converted to personal use.                             <--

Early Tuesday evening, after the memo became public, the IRS issued a
statement aimed at calming companies' concerns.

The agency said it had "no special enforcement program for frequent flyer
miles" and was reconsidering the advice given in the memo about adding the
price of air tickets to employees' W-2 statements.

"It does not establish precedent for any other case involving any other
employer," the agency said. "The IRS does not want other employers to be
misled by applying the analysis ... to their (employee reimbursement)
plans."

    
    .72
    
    Same in the Cayman islands. No personal income tax. No corporate income
    tax.
    
    They have, though, a 21% "import tax", and being such a small island,
    they tend to import just about everything.
    
    The offset is licensing fees for banks and insurance companies, since
    the islands are a "tax haven".
    
    What they don't have are intrusive laws like civil forfeiture, seizure
    of property without court order, etc, RICO statutes, etc.
    
    Their laws are written so there is NO DOUBT as to their application.
    Try reading 26 USC (the "tax code") and ask yourself what statute
    applies to what.

    "completely", you have got to be kidding.
    
    There are 33 million registered frequent flyers, virtually all of them
    of voting age.  Virtually all will be pissed off big time if the IRS
    invokes such a rule.  Plus the airlines, hotels, rental car and credit
    card companies will be mad.  You think Congress is going to let the IRS
    make all of these people screaming mad just to raise some undetermined
    amount of money?  No way.
    
    The IRS did not back off this because they saw the error of their ways,
    the heat came down from Capitol Hill.

    .81
    
    If we are such idiots, why don't you fill us in as to your vast
    knowledge, instead of browbeating us.
    
    Sheesh, how constructive.  Sounds like you brought your IRS attitude
    along to this job.
    
    Barry

    /john,
    
    Bill Clinton is pissed because congress withheld $200+ million
    from the IRS to do thier "audit from hell".   The IRS can't do
    squat if it's broke.
    
    MadMike  

    O.K., I won't browbeat you anymore.  My apologies.
    
    Simple rules:
    
    1. Congress passes all laws
    2. Congress controls purse strings
    3. Agencies budgets must be approved by Congress
    4. Agencies cannot do what Congress does not want
    5. The agencies are never out of control, only your elected
       representatives (see rule 4)
    
    The IRS cannot do anything that Congress does not want done.  Congress
    does not want to aggravate the frequent flyers, because most vote. 
    Therefore, the IRS will drop the whole FF issue, quickly and quietly. 
    You will not hear anything else about it.  Dead.  Buried.  History.

>    4. Agencies cannot do what Congress does not want

    It took me a while to stop laughing at that one.  I guess Congress
    wanted to blow Weavers wife and kid away.  I guess Congress wanted
    little kids at Waco to die in flames.  I guess Congress wanted the arms
    for hostages deal.  I guess Congress wanted Iran-Contra ...

    Congress provided the funds to arm, train and assemble such tactical
    units within these agencies.  Congress clearly wanted these units . 
    
    Congress, no doubt, did not want Waco, Ruby Ridge and Iran Contra to
    happen.  But don't confuse the funding of the units with their
    behavior.  If Congress had not funded the units (people, cars,
    helicopters, radios, guns, fuel, overtime, etc.), it would not have
    happened because there would not have been anyone to do it.  
    
    No Funding = it would not have happened
    Funding = it may or may not happen
    
    In the case of the IRS FF issue, the IRS will need funding to
    implement the collection of FF revenue (auditors, programming, new
    forms, additional staff, more computer capabiltiy - tapes, disk,
    memory, cpu, paper.
    
    No funding = no collection of FF revenue
    Funding = collection of FF revenue
    
    This is what I mean by Agencies cannot do what Congress does not want. 
    I meant strictly in the case of funding the capability to do something.
    
    I would think you would agree that if Congress provides no funds, you
    can't do much.  An agency with no money can't do anything.  Right!
    
    
    
    

   Re: Note 599.81 by MIMS::SANDERS_J
   

�    I can't resist beating up some more on those that said "all the IRS has
�    to do is ....."
    
   Being one of those, go ahead and beat.  However . . . Yes, all the IRS
   has to do is . . .
   
   The Congress has the power to levy taxes.  It is then the
   administration's job to collect those taxes.  Way back when they
   amendment was ratified, we got ourselves an INCOME tax.  INCOME is a
   very nebulous term according to the IRS.  They believe one of their
   purposes in life is to make that definition as broad as they can.
   
   Congress can do nothing about this unless they pass a law defining
   what income is not, or exempting various things from the tax.  It
   seems the SCOTUS has thown a few wrenches into the works.
   
   So all the IRS has to do is declare that FOO is income, and create a
   bunch of regulations (Congress does not get involved with
   regulations; these are not laws) to enforce it.  Since the tax code
   and process assumes guilty until proven innocent, you're stuck unless
   you can afford to fight it.
   
   

    It takes money to enforce.  No money, no enforcement.  I know what I am
    talking about, having worked there and being involved with those who
    were addrressing funding issues before an appropriations committee headed
    up by former Congressmen Jack Brooks of Texas (D).  I know how the system
    works, you clearly don't.  It is not going to happen.

    Karen.....uhhhh never mind!