Airline Employees flight discount

[NotEasy]

Tax client is an airline employee and he has the benefit to travel on discount flight tickets. He married his current wife/former girlfriend (let's call her Mary) in November 2011. Before the marriage, Mary could travel as an enrolled friend on discount tickets too. Since the discount for non-spouse is taxable, the airline has grossed it up and added the amount of discount for her tickets to his W-2 already.

Since they got married in 2011, client is now thinking that Mary should be considered his wife for the whole year for income tax purpose. Therefore, he believes the gross up amount of Mary's ticket discount in the first part of the year before their marriage should become non-taxable too. Since the airline has added the discount to his W-2 already, he is asking for a way to take it out.

I personally do not agree with him. I think Mary traveled on the discount tickets as a girlfriend (non-spouse) back then. So the discount amount should be taxable to him. The fact that he has married her before the end of the year does not make it become non-taxable.

Does anyone agree or disagree with me?

[Burke]

I agree with you. And I am sure the IRS will see it that way. Maybe the airline will give it back to him. Har-de-har.

[thomtax]

How the IRS handles things does not necessarily have any bearing on what the airline's rules for usage are. He seems to be confusing the IRS December 31 date with the realities of his employment rules.

LT

[taxea]

Tax client is an airline employee and he has the benefit to travel on discount flight tickets. He married his current wife/former girlfriend (let's call her Mary) in November 2011. Before the marriage, Mary could travel as an enrolled friend on discount tickets too. Since the discount for non-spouse is taxable, the airline has grossed it up and added the amount of discount for her tickets to his W-2 already.

Since they got married in 2011, client is now thinking that Mary should be considered his wife for the whole year for income tax purpose. Therefore, he believes the gross up amount of Mary's ticket discount in the first part of the year before their marriage should become non-taxable too. Since the airline has added the discount to his W-2 already, he is asking for a way to take it out.

I personally do not agree with him. I think Mary traveled on the discount tickets as a girlfriend (non-spouse) back then. So the discount amount should be taxable to him. The fact that he has married her before the end of the year does not make it become non-taxable.

Does anyone agree or disagree with me?

I do. True MFJ is appropriate for the entire year however I would allocate the travel between prior to and after marriage for the wife.

[Bees Knees]

IRS Pub 15-B

Recipient of benefit. The person who performs services
for you is the recipient of a fringe benefit provided for those
services. That person may be the recipient even if the
benefit is provided to someone who did not perform services
for you. For example, your employee may be the
recipient of a fringe benefit you provide to a member of the
employee’s family.

Basically that means a member of an employee's family can receive an employee benefit and it is treated as being provided to the employee. If the person receiving the benefit is not a member of the employee's family at the time the benefit is received, then it is not treated as being provided to the employee. Future family relations are irrelevant. The person has to be a member of the family at the time the benefit is provided for this rule to apply.