William K. Starr - Page 6

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          individual is entitled to use the per diem rate to substantiate             
          only meals and incidental expenses, not lodging expense.  The               
          Court held that a self-employed individual is not entitled to use           
          the per diem method to substantiate lodging expenses under                  
          section 274(d) and disallowed the taxpayer’s lodging expenses               
          that were not otherwise substantiated under section 274(d).  See            
          also Bracey v. Commissioner, T.C. Memo. 1998-254; Hoag v.                   
          Commissioner, T.C. Memo. 1993-348.                                          
               Petitioner would have us disregard the specific language of            
          section 274(d) and the procedures promulgated under that section.           
          We cannot do so.  Petitioner, as a self-employed individual, is             
          not entitled to use the Federal per diem rate to substantiate the           
          amount of his Schedule C lodging expenses.  He is, however,                 
          entitled to deduct lodging expense for the amounts substantiated            
          under section 274(d).  Petitioner is limited to a deduction of              
          $5,595, which represents the actual lodging expenses that                   
          petitioner substantiated under section 274(d).                              
               To reflect the foregoing and the concessions of the parties,           
                                                  Decision will be entered            
                                             under Rule 155.                          

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