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the revenue procedures provides that either of the following
methods may be used to prorate the Federal M&IE rate:15
(1) The rate may be prorated using the method
prescribed by the Federal Travel Regulations. Currently
the Federal Travel Regulations allow three-fourths of
the applicable Federal M&IE rate for each partial day
during which the employee or self-employed individual
is traveling away from home in connection with the
performance of services as an employee or self-employed
individual. The same ratio may be applied to prorate
the allowance for incidental expenses described in
section 4.05 of this revenue procedure;[16] or
(2) The rate may be prorated using any method that is
consistently applied and in accordance with reasonable
business practice. For example, if an employee travels
away from home from 9 a.m. one day to 5 p.m. the next
day, a method of proration that results in an amount
equal to two times the Federal M&IE rate will be
treated as being in accordance with reasonable business
practice (even though only one and a half times the
Federal M&IE rate would be allowed under the Federal
Travel Regulations).
15 The quotation below is from Rev. Procs. 2002-63 and
2003-80, supra, and differs in minor respects from the comparable
provisions of Rev. Procs. 2000-39 and 2001-47, supra.
Pursuant to Rev. Procs. 2002-63 and 2003-80, supra, a
taxpayer substantiating his M&IE expenses under sec. 4.03 of
those revenue procedures generally is limited to using the method
in sec. 6.04(1) of the revenue procedures for proration of the
Federal M&IE rate. However, if sec. 4.04 of the revenue
procedures applies, then either method under sec. 6.04 of the
revenue procedures may be used to determine the amount deemed
substantiated for a partial day of travel. Petitioner is
substantiating his M&IE under sec. 4.03 of the revenue
procedures, and he is employed in the transportation industry as
defined under sec. 4.04(4) of the revenue procedures. Therefore,
he may use either method.
16 The last sentence does not appear in Rev. Proc. 2000-39,
sec. 6.04(1), 2000-2 C.B. at 345, or in Rev. Proc. 2001-47, sec.
6.04(1), 2001-2 C.B. at 337, and has no effect upon this case.
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