Charley v. Commissioner
United States Court of Appeals for the Ninth Circuit
91 F.3d 72 (1996)
Philip Charley (defendant/taxpayer) was president of Truesdail Laboratories, which had an unwritten policy that frequent flyer miles earned on business travel belonged personally to the employee who earned them. On four 1998 business trips, Truesdail gave its travel agent funds for first-class tickets, but Charley had the agent buy cheaper coach tickets, upgraded to first class using his own frequent flyer miles, and had the price difference deposited into his personal travel account, netting $3,149.93 that he did not report as income. The Tax Court ruled the amount was taxable, and Charley appealed.
Whether an employee's conversion of frequent flyer miles into cash deposited into a personal travel account created by the employer constitutes taxable gross income.