- 17 -
for the day or the Federal M&IE rate. Rev. Proc. 96-64, sec.
4.02, 1996-2 C.B. at 428-429. Under special rules for the
transportation industry (including the trucking industry), a
taxpayer is permitted to treat $36 as the Federal M&IE rate for
all localities of travel in the continental United States.8 Rev.
Proc. 96-64, sec. 4.04(2), 1996-2 C.B. at 429.
A per diem allowance is treated as paid only for M&IE if:
(1) the payor pays the employee for actual expenses for
lodging based on receipts submitted to the payor, (2)
the payor provides the lodging in kind, (3) the payor
pays the actual expenses for lodging directly to the
provider of the lodging, (4) the payor does not have a
reasonable belief that lodging expenses were or will be
incurred by the employee, or (5) the allowance is
computed on a basis similar to that used in computing
the employee’s wages or other compensation (e.g., the
number of hours worked, miles traveled, or pieces
produced). [Rev. Proc. 96-64, sec. 4.02, 1996-2 C.B.
at 428-429; emphasis added.]
After applying the test in section 4.02 of the revenue
procedures to determine whether a per diem allowance is paid only
for M&IE or for lodging and M&IE, the revenue procedures contain
special rules for applying the section 274(n) 50-percent
limitation to per diem allowances. Section 6.05 of the revenue
procedures provides:
Application of the 50-percent limitation on meals and
expenses. When a per diem allowance is paid only for
meals and incidental expenses * * * an amount equal to
the lesser of the per diem allowance for each calendar
day * * * or the Federal M&IE rate for the locality of
8 Under Rev. Proc. 94-77, sec. 4.04(2), 1994-2 C.B. 825, a
taxpayer was permitted to treat $32 as the Federal M&IE rate for
all localities of travel in the continental United States.
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