Arthur L. Rubin wrote:

- quote -

OK, I'll take a stab at this... <g
If the points are readily convertible into CASH or a
refundable CREDIT, they would be taxable when the cash or
credit is constructively received.

If the points can be used to obtain a DISCOUNT on a future
purchase, I'd say they are not taxable. But, of course, the
"basis" of the items acquired will be reduced.

If the items can be exchanged for GOODS OR SERVICES, you
would be taxed on the "fair market value" of the items
received. As with any issue dealing with FMV, there could be
legitimate disagreement as to ~how~ to measure the value.
However, it would be specious to argue that such items have
NO value, or that you should be excused from taxation
because the valuation process is "difficult."

- quote -

That would obviously be a "facts and circumstances"
question. If you do that kind of thing on a "regular and
continuous basis" with an "expectation of profit," then it
is likely a "business." But, if you then try to deduct a
bunch of expenses against it, I'd guess that the IRS would
try to push it back into the "hobby" category. Without
knowing the dollar amounts involved, etc., my guess is that
the IRS would expect to see MANY hours per week devoted to
this activity. Otherwise, I think their position would be
that you were simply trying to earn some extra money to
offset your "surfing" expenses and, therefore, this is a
hobby/personal pursuit.

MTW

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I belong to a number of reward systems. Not counting credit
card rewards (obviously, the value of the "points" is
deducted from the purchase price if you purchasing something
deductible), and FFM, I belong to MyPoints, E-rewards,
HIPoints, JDPowerPoints, and probably a few that I've
forgotten because I never get statements nor earn enough
points to cash in.

MyPoints provides points primarily for reading E-mails, in
the hope that you will buy services advertised in the E-mail
and earning more points. E-Rewards is much the same,
although points are denominated in USD and you also get
points for filling out surveys. HIPoints (from Harris Poll
Online) and JDPowerPoints (from J D Power surveys) are
issued for filling out surveys. Also SurveySpot issues
ocassional cash rewards for filling out surveys.

Question 1: Are the points taxable income when earned, or
when cashed, or to be ignored entirely. (If when earned,
how are the points to be valued? If when cashed, how are
the prizes to be valued, as I suspect I'm never going to get
$600 worth of prizes unless I buy or sell a house or open an
investment account for points.)

Question 2: If taxable (as is clear in the case of
SurveySpot), are they Schedule C income or miscellaneous
income? In other words, could "filling out surveys" or
"reading E-mail and clicking on links" be a business?

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