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OPINION
Section 274(n) generally allows a taxpayer to deduct only 50
percent of the amount that otherwise would qualify as an
allowable deduction for meals or business entertainment. The
issue is whether this 50-percent limitation applies to the full
amount of per diem allowances paid with respect to the Beech
Trucking drivers, as respondent contends. For the reasons
discussed below, we agree with respondent.
A. Statutory Framework
Section 162 allows a deduction for all ordinary and
necessary expenses incurred during the taxable year in carrying
on a trade or business. Section 162 enumerates certain types of
deductible expenses, including “a reasonable allowance for
salaries or other compensation for personal services actually
rendered”, sec. 162(a)(1), and “traveling expenses (including
amounts expended for meals and lodging * * *) while away from
home in the pursuit of a trade or business”, sec. 162(a)(2).
Section 274(d) generally disallows any deduction under
section 162 for, among other things, “any traveling expense
(including meals and lodging while away from home)”, unless the
taxpayer complies with stringent substantiation requirements as
to the amount, time and place, and business purpose of the
expense. Sec. 274(d)(1). Section 274(d) authorizes the
Secretary to provide by regulations that some or all of these
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Last modified: May 25, 2011