Lawrence Zelenak (Duke), Custom and the Rule of Law in the Administration of the Income Tax, 62 Duke L.J. 855 (2012):

From the early years of the federal income tax to the present, the IRS has engaged in what might be termed
“customary deviations” from the dictates of the Internal Revenue
Code, always in a taxpayer-favorable direction. A prominent current
example is the IRS’s “don’t ask, don’t tell” policy with respect to
employee-retained frequent flier miles; in a 2002 announcement
(which, as of 2012, is still in force), the IRS indicated that such miles
were technically within the scope of the statutory definition of gross
income, but that the IRS had no intention of enforcing the law. This
Essay describes and evaluates the phenomenon of administratively created
customary deviations from the Code. After defining the
concept of customary deviations and explaining why such deviations
are sometimes attractive to tax administrators, the Essay offers a brief
historical survey of customary deviations, paying particular attention
to the pre-1984 treatment of a miscellany of fringe benefits of
employment, and to a spate of recent announcements that the IRS
would not enforce the Code’s anti-loss-trafficking rules in certain
contexts. The Essay also explains how the development of customary
deviations has depended on the absence of third-party standing in tax
litigation, and how the lack of any judicial check on unauthorized
giveaways by tax administrators threatens rule-of-law values. It
concludes with a proposal for legislation aimed at retaining the
practical advantages of customary deviations while assuaging rule-oflaw
concerns.