Rev. Proc. 83-71

SECTION 1. PURPOSE

The purpose of this revenue procedure is to provide a method by which employees and self-employed individuals may elect to deduct a specified amount per day for meals while traveling away from home in the pursuit of their trade or business instead of substantiating the actual cost of each meal. This new method will relieve taxpayers of the burden of keeping records of the amount of each expenditure otherwise required by section 1.274-5 of the Income Tax Regulations. This revenue procedure will not preclude taxpayers from deducting, and substantiating, the actual amount of meal expenses for a taxable year if they wish to do so.

SEC. 2. BACKGROUND

Section 162(a)(2) of the Internal Revenue Code allows a deduction for all ordinary and necessary trade or business expenses, including traveling (including expenses for expenses meals and lodging other than those that are lavish or extravagant under the circumstances) while away from home in the pursuit of a trade or business.

Section 274(d) of the Code and section 1.274-5 of the regulations generally disallow deductions for traveling expenses, including meals and lodging while away from home, unless the amount of each expenditure, and the time, place, and business purpose of the travel are substantiated by adequate records or by sufficient evidence corroborating t he taxpayer's own statement. Section 274(d) of the Code, however, authorizes the Treasury Department to issue regulations under which some or all of the substantiation requirements will not apply to expenses which do not exceed an amount prescribed pursuant to the regulations.

Section 1.274-5(h) of the regulations, as published in the Federal Register (T.D. 7909, 48 FR 40370) on September 7, 1983, states that the Commissioner of Internal Revenue may prescribe rules under which a taxpayer may elect to use a specified amount or amounts for meals while traveling in lieu of substantiating the actual cost of meals. The regulation does not relieve the taxpayer of substantiating the actual cost of other travel expenses as well as the time, place, and business purpose of the travel.

This revenues procedure provides the appropriate amount that may be used in lieu of substantiating the actual cost of meals, and rules for deducting this amount, pursuant to section 1.274- 5(h) of the regulations.

SEC. 3. OPTIONAL METHOD OF COMPUTING DEDUCTIBLE MEAL EXPENSES

.01 With respect to deductible meal expenses paid or incurred after December 31, 1982, taxpayers may elect to claim deductions for meal expenses in the amount of (a) $14 per day for travel that requires a stay of less than 30 days in one general locality where the taxpayer's trade or business activity is conducted, or (b) $9 per day for travel that requires a stay of 30 days or more in one general locality where the taxpayer's trade or business activity is conducted. These deductions for meal expenses will be deemed substantiated within the meaning of section 1.274-5(c) of the regulations if the elements of time, place, and business purpose of the travel are substantiated within the meaning of sections 1.274-5(b)(2) and 1.274-5(c) of the regulations.

.02 On the day that a taxpayer begins or ends business travel, the taxpayer will be allowed one-fourth of the applicable allowance specified in paragraph 3.01 for each six-hour quarter of the day during any portion of which the taxpayer is either traveling or is away from home. For purposes of this rule, the quarters of the day are midnight to 6.A.M., 6.A.M. to noon, noon to 6.P.M., and 6.P.M. to midnight.

.03 For purposes of determining the number of days that the taxpayer is required to be in a general locality under paragraph 3.01 above, brief incidental travel away from the general locality of the taxpayer's away-from-home trade or business activity, such as weekend trips to visit the taxpayer's family at home or for recreation, do not reduce the number of days that the taxpayer is considered to be in that general locality.

.04 The deduction provided above applies only to meals consumed during trips that require substantial sleep or rest. A taxpayer's expenses for meals on trips that do not require substantial sleep or rest are not deductible under section 162 of the Code. See United States v. Correll, 389 U.S. 299 (1967), Ct.D. 1917, 1968-1 C.B. 64.

.05 In the case of a taxpayer who is reimbursed for meal expenses, this method of computing deductible meal expenses may be used only if (a) the taxpayer is reimbursed a separate amount for meals (not a per them allowance that provides reimbursement for both meals and lodging), (b) the reimbursement is reflected as income on the taxpayer's federal income tax return, (c) the taxpayer is not required to account for the actual amount of meal expenses to the person providing the reimbursement, and (d) the taxpayer is not related to the person providing the reimbursement within the meaning of section 267(b) of the Code; for this purpose the percentage of ownership interest referred to in section 267(b)(2) shall be 10 percent. For the rules regarding reimbursements or per them allowances that include lodging and other subsistence expenses in addition to meals, see Rev. Rul. 80- 62, 1980-1 C.B. 63, as modified by Rev. Rul. 80-203, 1980-2 C.B. 101.

.06 A taxpayer may elect to use this optional method on a yearly basis. This method is elected by computing meal deductions on the taxpayer's income tax return by means of this method. If the taxpayer elects to use this optional method, it must be used in computing all deductions for meal expenses (except for reimbursed meal expenses that do not meet the requirements for the use of this method stated in paragraph 3.05) that are paid or incurred during the taxable year and after December 31, 1982.

SEC. 4. EFFECTIVE DATE

This revenue procedure is effective with respect to expenses for meals deductible under section 162(a)(2) of the Code paid or incurred after December 31, 1982.