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locations is $2. See 41 C.F.R. sec. 301-7.12(a)(2)(i) (1994 &
1996). The portion of the M&IE rates that is attributable to
incidental expenses incurred in any other location varies from $1
to $53, depending on the M&IE rate for that location. See 41
C.F.R. ch. 301, app. B (1994 & 1996). We believe that
petitioner’s deductions for his incidental expenses are limited
under the travel regulations, which are incorporated by reference
into the revenue procedures, to the incidental expense portion of
the applicable M&IE rate.10 See 41 C.F.R. sec. 301-7.12(a)(2)
(1994 & 1996), which provides that the M&IE rate must be reduced
“When all or part of the meals are furnished at no cost or at a
nominal cost to the employee by the Federal Government”.
We note that taxpayers such as petitioner need not limit
their deductions to the incidental expense portion of the M&IE
rates. Specifically, taxpayers, to the extent that the amounts
set forth in the revenue procedures fail to reflect the actual
cost of their incidental expenditures, are entitled to a
deduction for their actual expenses. In such a situation,
however, taxpayers must be prepared to meet all the
substantiation requirements, including, especially, written
10 Petitioner argues that his deductions at these rates
should not be subject to the 50-percent reduction for meals and
entertainment. We agree. The Rule 155 computation should
reflect a deduction of the entire amounts of the M&IE rates which
are attributable to incidental expenses.
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