Jane takes her long-awaited vacation trip around the world in January of Year 1. Because it is an expensive trip, the airline gives her assignable frequent flyer miles with a value of $10,000. Also in Year 1, Jane assigns $3,000 worth of those miles to her niece as a gift; sells another $3,000 worth to her neighbor for $3,000 in cash; and keeps the remaining $4,000 worth of miles for herself. She uses that $4,000 worth later in Year 1.

Under a strict interpretation of IRS rules, what is Janes gross income for Year 1 with regard to these frequent flyer miles?

1. $10,000.

B. $3,000.

C. Zero.

D. None of the above.