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arrived back in Seattle between 8:30 p.m. and 9:30 p.m. During
the 6- to 7-hour layover the passengers would explore the city of
Victoria.
The company provided a four-bedroom condominium in Victoria
where the Clipper’s crew rested during the layover. Because
most of the crew were young and noisy, petitioner did not go to
the condominium. Instead, he had lunch, swam for 30 minutes, and
returned to the Clipper to sleep or rest for approximately 4
hours on a cot he stored on board. If the sleeping
accommodations on the ferryboat had not been available,
petitioner would have rented a room at a hotel.
Petitioner was neither paid an hourly wage for the layover
period in Victoria nor reimbursed for M&IE he incurred during
these layovers. Petitioner did not provide receipts to
substantiate his M&IE. Instead, he used the allowable Federal
M&IE rate for the locality of travel.
D. Procedural Background
Petitioners timely filed their Federal income tax returns
for the years at issue. Respondent issued the notice of
deficiency in dispute on January 20, 2005. Petitioners timely
filed their petition on March 29, 2005.
Petitioners’ gross income for the years at issue is not in
dispute. The parties dispute whether petitioners may deduct
under section 162(a)(2) traveling expenses listed on their
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