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testimony established that the vast majority of the per diem was
spent on meals and incidental travel expenses such as laundry and
showers. Most of the drivers’ rest periods were taken in the
sleeping berth and not at motels. There is no evidentiary
support for petitioners’ position that 60 percent of the per diem
was spent on lodging.
Second, petitioners argue that, as section 4.02(5) of Rev.
Proc. 94-77 was issued on December 27, 1994, Continental did not
have a sufficient opportunity to alter its accounting systems to
provide for an alternative per diem allowance paid on a basis
other than per mile. Continental had recently purchased new
computer equipment, and it claimed it would have lost drivers to
competing trucking companies if it had altered the per diem
method of payment. We have found that Continental made a
business decision to pay its drivers a per diem for their travel
expenses in lieu of reimbursement for actual expenses incurred.
This method correlated with its payment of wages. This method
required less recordkeeping. Under this method, Continental did
not need to maintain actual receipts for each expense incurred by
its drivers. Congress provided that the Secretary may by
regulation provide rules for meeting the stringent substantiation
requirements of section 274(d). Section 4.02(5) of Rev. Proc.
94-77 is one of those rules.
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