Transport Labor Contract/Leasing, Inc. & Subsidiaries - Page 17

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               drivers in the form of “advances”, frequently an amount                
               approximating an allowable per diem.                                   
               As required by tax law and part of our service, we have                
               tabulated the per diems to be used in your tax return                  
               preparation.  As payer of these amounts, you must                      
               afford them special treatment under the 20% reduction                  
               provision of Internal Revenue Code Section 274(n).  You                
               should take this into account when preparing your tax                  
               returns for your business and may want to forward a                    
               copy of this letter to your tax advisor.                               
               The amount of per diem you paid to drivers, or which we                
               partially paid on your behalf during 1993, was * * *                   
               [total of per diem amounts.21]                                         
               Petitioner filed consolidated Form 1120, U.S. Corporation              
          Income Tax Return (Form 1120), as the parent corporation of a               
          group of affiliated corporations for each of petitioner’s taxable           
          years 1993, 1994, 1995, and 1996.  Schedule K, Other Information,           
          included as part of each of those Forms 1120 showed business                
          activity as “leasing” and product or service as “employees”.                
          Form 851, Affiliations Schedule, included as part of those Forms            
          1120 showed TLC’s business activity as “leasing”.                           
               On October 27, 2000, respondent sent a notice of deficiency            

               21The per diem letters for the calendar years 1994, 1995,              
          and 1996 were identical to the per diem letter for calendar year            
          1993 except that the reference to “20% reduction” was changed to            
          “50% percent reduction” in order to reflect changes made to sec.            
          274(n)(1) by the Omnibus Budget Reconciliation Act of 1993 (OBRA            
          1993), Pub. L. 103-66, sec. 13209(a), 107 Stat. 469.  In this               
          connection, prior to its amendment by OBRA 1993, sec. 274(n)(1)             
          limited a deduction for food or beverages to 80 percent of the              
          amount otherwise allowable (80-percent limitation).  For taxable            
          years that began after Dec. 31, 1993, sec. 274(n)(1) limits a               
          deduction for food or beverages to 50 percent of the amount                 
          otherwise allowable (50-percent limitation).                                

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