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Lodging expenses that are incurred while traveling away from
home in the pursuit of business are generally deductible under
section 162(a). Section 274(d), however, disallows a deduction
for lodging expenses under section 162 when a taxpayer fails to
substantiate (1) the amount of the expense, (2) the time and
place of travel, and (3) the business purpose of the expense.
Section 274(d) provides in part:
SEC. 274(d). SUBSTANTIATION REQUIRED.--No
deduction or credit shall be allowed--
(1) under section 162 or 212 for any
traveling expense (including meals and lodging
while away from home),
* * * * * * *
unless the taxpayer substantiates by adequate records
or by sufficient evidence corroborating the taxpayer’s
own statement (A) the amount of such expense or other
item, (B) the time and place of the travel * * *,
(C) the business purpose of the expense or other item
* * *
The Secretary is vested with the authority to prescribe
rules waiving the substantiation requirements in circumstances
where it is impracticable for documentary evidence to be
required. See sec. 274(d). Pursuant to this authority, Rev.
Proc. 94-77, 1994-2 C.B. 825, was issued for the purpose of:
providing rules under which the amount of ordinary and
necessary business expenses of an employee for lodging,
meal, and/or incidental expenses incurred while
traveling away from home will be deemed substantiated
under sec. 1.274-5T of the temporary Income Tax
Regulations when a payor (the employer, its agent, or a
third party) provides a per diem allowance under a
reimbursement or other expense allowance arrangement to
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Last modified: May 25, 2011