On February 23, 2021, the U.S. Tax Court ruled in favor of our client that acquisition of credit card reward points, no matter how many they receive, is not a taxable event.
In Anikeev v. Commissioner, the IRS tried to tax credit card reward points that the taxpayer received claiming they were “cash equivalents” because the taxpayer purchased gift cards with his credit card, which generated rewards points, and then used the gift cards to purchase money orders, which the taxpayer then deposited into his bank account. The Tax Court ruled the transaction was not a taxable event: “Reward [points] petitioners received were not notes, but they were commitments by [the credit card issuer] to allow petitioners credits against their card balances. Respondent’s analysis leaps to the cash equivalence position without an analysis of the origin of the [r]eward [points].”
This was a case of first impression and an important development in the cash equivalent doctrine.
Read the decision here: https://gs-lawfirm.com/wp-content/uploads/2021/03/Anikeev-decision.pdf