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defer prepaid service income on warranty contracts were required
to adhere to the revenue procedure’s condition regarding the
manner of accounting for insurance expenses associated with the
warranty contracts), affg. Toyota Town, Inc. v. Commissioner,
T.C. Memo. 2000-40; Mulholland v. United States, 28 Fed. Cl. 320,
344 (1993) (taxpayers’ failure to adhere to conditions of a
revenue procedure rendered them ineligible for its benefits),
affd. 22 F.3d 1105 (Fed. Cir. 1994).
Petitioner argues that the complained-of conditions
contained in section 4.02 of the Revenue Procedures are invalid
because they conflict with certain regulations under section
62(a)(2). Petitioner also suggests that sections 4.02 and 6.05
of the Revenue Procedures, as applied to the instant case,
reflect an arbitrary or unlawful exercise of respondent’s
authority. For the reasons discussed below, we disagree with
each of these arguments.
a. Does Section 4.02 of the Revenue Procedures
Conflict With the Section 62(a)(2) Regulations?
As previously discussed, in certain specified circumstances,
section 4.02 of the Revenue Procedures limits the amount of the
employees’ reimbursed travel expenses that is deemed to be
substantiated to the lesser of: (1) The actual per diem
allowance for the day; or (2) the amount computed at the Federal
M&IE rate for the locality of travel–-which rate the taxpayer may
treat (for travel in the continental United States) as being $32
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