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travel for such day * * * is treated as an expense for
food and beverages. When a per diem allowance is paid
for lodging, meal, and incidental expenses, the payor
must treat an amount equal to the Federal M&IE rate for
the locality of travel for each calendar day
* * * the employee is away from home as an expense for
food and beverages. For purposes of the preceding
sentence, when a per diem allowance for lodging, meal,
and incidental expenses for a full day of travel is
paid at a rate that is less than the Federal per diem
rate for the locality of travel, the payor may treat an
amount equal to 40 percent of such per diem allowance
for a full day of travel as the Federal M&IE rate for
the locality of travel.
C. Application of the Revenue Procedures
Petitioners claimed deductions for the per diem payments on
the basis of the fourth sentence of section 6.05 of the revenue
procedures; i.e., they treated 40 percent of the per diem
payments as expenses for food and beverages and thus subject to
the section 274(n) 50-percent limitation, and deducted the
remaining 60 percent in full (resulting in a claimed deduction of
80 percent of the total per diem payments).
Respondent contends that, after applying the test set forth
in section 4.02 of the revenue procedures, petitioners are not
entitled to the claimed treatment because under the revenue
procedures the per diem payments are treated as being made only
for M&IE and not for lodging. Accordingly, respondent contends,
under section 6.05 of the revenue procedures, the per diem
payments are treated as being solely for food and beverages and
thus fully subject to the 50-percent limitation of section
274(n). We agree.
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