Charles A. Boyd and Darby A. Harvey - Page 20

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          1996-1 C.B. 688.  For 1997, the average daily per diem allowance            
          was $32.45, which is less than the Federal M&IE rate of $36.  See           
          Rev. Proc. 96-64, 1996-2 C.B. at 429.  Accordingly, under section           
          6.05 of the revenue procedures, the full amount of the per diem             
          payments is treated as being for food and beverages and thus                
          subject to the 50-percent limitation of section 274(n).10  Id.              
               D.   Petitioners’ Contentions                                          
               As in Beech Trucking Co., petitioners argue that the revenue           
          procedures are invalid insofar as they operate (in section 4.02)            
          to characterize the per diem payments as being solely for M&IE              
          and (in section 6.05) to apply the section 274(n) limitations to            
          the full amount of the per diem payments.  Petitioners do not               
          argue that the revenue procedures are otherwise invalid; to the             
          contrary, petitioners rely on section 4.01 of the revenue                   
          procedures for deemed substantiation of the drivers’ travel                 
          expenses and on that part of section 6.05 of the revenue                    
          procedures that would permit Continental (absent the provision in           
          section 4.02 which deems the per diem payments to be solely for             
          M&IE) to treat 60 percent of the per diem payments as being                 
          reimbursements of the drivers’ lodging expenses.  In effect,                


               10  To the extent that, for 1996, $32.19 was the per diem              
          allowance, only $32 is treated as being for food and beverage and           
          thus subject to the sec. 274(n) limitation.  Petitioners must               
          concede this because they have not otherwise substantiated the              
          amount that is greater than that which is deemed substantiated in           
          the revenue procedures.                                                     





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