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As a general rule, this Court will not consider issues
raised for the first time on brief where surprise and prejudice
are found to exist. Fox Chevrolet, Inc. v. Commissioner, 76 T.C.
708, 735 (1981). Petitioner was not surprised or prejudiced.
The revenue procedures petitioner relied upon, as discussed
above, clearly state that section 274(n)(1) reduces the allowable
Federal M&IE rate by 50 percent. Furthermore, petitioner raised
in his pretrial memorandum and opening brief the issue that “If
the taxpayer was ‘away from home,’ what amount is allowable as a
travel deduction?” Accordingly, this Court finds petitioner was
not surprised and prejudiced by respondent’s posttrial
contentions in this regard.
Section 274(n)(1)(A) provides that the amount allowable as a
deduction for “any expense for food or beverages” is generally
limited to 50-percent of the amount of the expense that would
otherwise be allowable. The revenue procedures provide rules for
applying the section 274(n)(1) 50-percent limitation to per diem
allowances. Under section 6.05(1) of the revenue procedures, a
taxpayer who computes the amount of his or her M&IE under section
4.03 of the revenue procedures is required to treat that amount
as an expense for food and beverages. The expenses are thus
subjected to section 274(n)(1).
Petitioner incurred food or beverage and incidental expenses
while traveling away from home for business during the years at
issue. Petitioner also computed and substantiated his M&IE under
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