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reimbursement or other expense allowance arrangement to pay for
such expenses.”7 Rev. Proc. 96-28, sec. 1, 1996-1 C.B. at 686.
Under the Revenue Procedures, if a per diem allowance
includes reimbursement for lodging, in addition to meal and
incidental expenses (M&IE), the amount of expenses deemed
substantiated each day is the lesser of the per diem allowance
for the day or the Federal per diem rate for the locality of
travel for the day.8 Rev. Proc. 96-28, sec. 4.01, 1996-1 C.B. at
687. If the per diem allowance includes reimbursement only for
M&IE (and not for lodging), the amount of expenses deemed
substantiated each day is the lesser of the per diem allowance
for the day or the Federal M&IE rate. Rev. Proc. 96-28, sec.
7 Neither sec. 274(d) nor the regulations thereunder nor the
applicable revenue procedures explicitly refer to the
substantiation requirements that apply to the employer or payor
that seeks to deduct payments of travel-expense reimbursements.
Under sec. 274(d), however, the “taxpayer” must meet the
stringent substantiation requirements to be entitled to a
deduction under sec. 162 for any travel expense. The parties do
not disagree that the substantiation methods authorized under
Rev. Proc. 94-77, supra, and Rev. Proc. 96-28, supra, apply to
petitioner, as payor of the per diem allowances, in determining
Beech Trucking’s compliance with the sec. 274(d) substantiation
requirements.
8 For this purpose, the Federal per diem rate is the sum of
the Federal lodging expense rate and the Federal meal and
incidental expense (M&IE) rate. Rev. Proc. 96-28, sec. 3.02,
1996-1 C.B. at 687. The Federal M&IE rate represents the daily
amount that the Government pays to its traveling employees to
reimburse them for breakfast, lunch, dinner, and incidental
expenses. Johnson v. Commissioner, 115 T.C. 210, 227 (2000)
(citing 41 C.F.R. sec. 301-7.2(a)(2) (1994 & 1996)).
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