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What petitioners did is provide good, reasonable estimates
and averages of the expenses that Continental’s drivers incurred
on the road. While we understand why petitioners made a business
decision not to require receipts and records of the drivers’
expenses, the regulations under section 274(d) make it clear that
estimates and averages are not sufficient to establish travel
expenses pursuant to section 274(d). See Sanford v.
Commissioner, 50 T.C. at 827 (the Cohan doctrine does not apply
to expenses covered by section 274(d)).
Furthermore, we note that were we to find that some of the
expenses were ordinary business expenses under section 162,
petitioners have failed to substantiate meals and other
incidental expenses pursuant to section 274(d). Therefore,
petitioners fare better with the deemed substantiation of the
revenue procedures than by actual substantiation under sections
162 and 274(d).
III. Whether Petitioners May Deduct More Than 50 Percent of the
Nonmeal Travel Expenses Incurred By Drivers
Petitioners argue that “if the Fifth Part of Section 4.02 of
Revenue Procedure 94-77 is valid, petitioners are entitled to a
downward adjustment in the audit adjustment to Continental’s net
income for payment of substantial, fully deductible nonmeal
travel expenses.” Essentially, petitioners seek to deduct an
amount of the per diem allowance that is more than 50 percent,
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