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Rakeback is often called rake rebate. It has all the characteristics of a rebate. I think you have an argument.


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So if my boss gives me a "Time spent working rebate" instead of a bonus, I don't have to pay tax on it? Word games are fun on the internet, but they are not going to help you in a court of law. Even better I am pretty sure that you are supposed to pay income tax on some rebates/rewards (like credit cards and airline miles) but no one does. Somethings (like car rebates) are explicitly exempted.

People have been trying to do this type of tax avoidance since the law was inacted. All the easy shelters (like this) have long since been closed.

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I'm not saying that his interpretation is correct. I haven't looked up the relevant sections of the tax code and it sounds like you haven't either. Therefore, neither one of us has any clue if this is a legitimate treatment or not.

There's probably nothing specifically about rake rebates in the code. Therefore, there's probably room to argue that they fall into one of several existing categories. For example, when you get the 5th cup of coffee free, it's not earned income. So, I still think there's probably an argument that could be made.