The facts of Williams assist in understanding the sleep or rest rule articulated above. In Williams, the taxpayer, a railroad engineer, worked a 16-hour day every other day. On a turnaround run between Montgomery, Alabama, his home terminal, and Atlanta, Georgia, he had a 6-hour layover in Atlanta before his return to Montgomery the same day. Although the taxpayer was not required by his employer to do so, during the layover period he felt it was necessary to sleep and rest and rented a hotel room. At the hotel he had lunch and dinner as well as rested and slept before resuming work.

The Court of Appeals for the Fifth Circuit concluded that on account of the length of the taxpayer's workday (16 hours), ⁸ the duration of his layover (6 hours), and the responsibility of his position, it was necessary for the taxpayer to rest during his layover in order to carry out his assignment, even though2006 U.S. Tax Ct. LEXIS 32">*46 no statute, regulation, or railroad rule required 127 T.C. 124">*131 him to sleep or rest before his return trip. 286 F.2d 333">Id. at 337, 339. Furthermore, the court reasoned that the phrase "away from home" does not require a person to actually be away overnight. The court held that the costs of meals, lodging, and tips during the 6-hour layover were deductible. 286 F.2d 333">Id. at 335, 340.

Shortly after Williams was decided, the Commissioner issued Rev. Rul. 61-221, 1961-2 C.B. 34, which announced his concurrence with the sleep or rest rule as interpreted in Williams. ⁹ The Supreme Court in United States v. Correll, 389 U.S. 299">389 U.S. 299, 88 S. Ct. 445">88 S. Ct. 445, 19 L. Ed. 2d 537">19 L. Ed. 2d 537 (1967),2006 U.S. Tax Ct. LEXIS 32">*47 observed that the rule contemplated a sleep or rest period of sufficient duration that would ordinarily be related to a significant increase in expenses. The Supreme Court acknowledged the rule provided a definite, fair, and ascertainable standard. 389 U.S. 299">Id. at 302-303.

2006 U.S. Tax Ct. LEXIS 32">*48 The Tax Court in Barry v. Commissioner, 54 T.C. 1210">54 T.C. 1210 (1970), affd. 435 F.2d 1290">435 F.2d 1290 (1st Cir. 1970), indicated that the rest period contemplated by the sleep or rest rule is of the type illustrated by Williams and normally involves a rest of sufficient duration to cause an increase in expenses. A brief rest period which "anyone can, at any time, without special 127 T.C. 124">*132 arrangement and without special expense, take in his own automobile or office" does not qualify. 54 T.C. 1210">Id. at 1213. The Court in Barry disallowed expenses for meals claimed by a taxpayer on 1-day business trips that lasted between 16 and 19 hours during which the taxpayer rested briefly once or twice in his automobile.

If the nature of petitioner's employment was such that when away from home, during released time, it was reasonable for him to need and to obtain sleep or rest in order to meet the exigencies or business demands of his employment, his expenses for this purpose would be traveling expenses under section 162(a)(2). See 286 F.2d 333">Williams v. Patterson, supra at 340; Rev. Rul. 75-170, 1975-1 C.B. 60. However, the released time must be of a sufficient duration that it2006 U.S. Tax Ct. LEXIS 32">*49 would ordinarily be related to a significant increase in expenses. See 389 U.S. 299">United States v. Correll, supra.

Respondent argues that petitioners are not entitled to a deduction for the expenses incurred in the brief layovers during peak travel season because the layovers were insufficient in duration to require sleep or rest. In 2001 and 2002, during peak-season, petitioner's layovers in Victoria and Friday Harbor never exceeded an hour, and he did not produce evidence showing he rested during that time. Petitioner also did not show he rested during the 5-hour layover in Friday Harbor during peak-season in 2003. Instead, petitioner testified that during this layover he was operating the ferryboat. Even though petitioner testified he did sleep or rest while another captain took command of the ferryboat, he did not produce evidence showing the rest period was part of a layover (released time) or was of sufficient duration that it caused him to incur a significant increase in expenses.

As to the peak-season runs, petitioner's case is indistinguishable from 54 T.C. 1210">Barry v. Commissioner, supra. Therefore, the Court finds petitioner was not away from2006 U.S. Tax Ct. LEXIS 32">*50 home within the meaning of section 162(a)(2) during peak-season Victoria/Friday Harbor runs in 2001 and 2002 and the Friday Harbor runs in 2003.

Respondent, citing Stevens v. Commissioner, T.C. Memo 1985-16, argues that petitioner is not entitled to a deduction for the expenses incurred during the off-peak-season 6- to 7-hour layovers in Victoria because the layovers were solely the result of scheduling rather than petitioner's need for sleep or rest.

However, the proper inquiry is into the nature of petitioner's employment and his need for sleep or rest, not whether a layover was the result of scheduling. The factors to consider in determining whether petitioner needed sleep or rest include his age, his physical condition, the length of his workday, and the importance of being alert so that he could carry out his job's responsibilities without fear of injury to others. These factors are applied against the background of petitioner's experience in his employment and the practices and customs of similarly situated individuals. See Williams v. Patterson, 286 F.2d 333">286 F.2d at 339.

Petitioner's background is impressive. After attending the2006 U.S. Tax Ct. LEXIS 32">*51 Merchant Marine Academy, he earned a master's degree in marine transportation, and he has been employed in this field for over 25 years. In the years at issue, petitioner was the director of marine operations and senior captain for the company. His workday lasted on average 15 to 17 hours including a 6- to 7-hour layover in Victoria during off-peak season. He was responsible for his crew and the safety of up to 1,200 passengers during all voyages. Because of possible extreme weather conditions, high sea levels, log tows, and other obstacles in the ocean, petitioner as captain had to give his full attention at all times, and any trouble or incident on the ferryboat was his responsibility. Petitioner also needed to consider that his workday could be significantly lengthened on account of any of the above situations. As a result, petitioner's job was very demanding.

Considering the facts, this Court finds it was reasonable for petitioner to obtain sleep or rest in order to meet the exigencies and business demands of his employment. See Williams v. Patterson, 286 F.2d 333">286 F.2d at 339-340. Further, the released time of 6 to 7 hours during the Victoria voyage was sufficient in duration2006 U.S. Tax Ct. LEXIS 32">*52 that it would normally be related to an 127 T.C. 124">*134 increase in expenses. ¹⁰ Accordingly, petitioner was "away from home" for purposes of section 162(a)(2). ¹¹

Respondent argues that if petitioner is found to have been "away from home" under section 162(a), the allowable Federal M&IE rate should be reduced pursuant to the2006 U.S. Tax Ct. LEXIS 32">*53 "partial day" rule and further reduced by the 50-percent limitation rule of section 274(n)(1), as prescribed in certain revenue procedures.

Section 274(d) generally disallows a deduction under section 162 for "any traveling expense (including meals and lodging while away from home)" unless the taxpayer complies with certain substantiation requirements. Sec. 274(d)(1). The section further provides that regulations may prescribe that some or all of the substantiation requirements do not apply to an expense which does not exceed an amount prescribed by those regulations. Id.

Pursuant to section 1.274-5(g), Income Tax Regs., the Commissioner is authorized to prescribe rules in pronouncements of general applicability under which allowances for certain types of ordinary and necessary expenses for traveling away from home will be regarded as satisfying the substantiation requirements of section 274(d). Beech Trucking Co. v. Commissioner, 118 T.C. 428">118 T.C. 428, 118 T.C. 428">434 (2002). Section 1.274-5(j)(1) and (3), Income Tax Regs., provides the Commissioner may establish a method under which a taxpayer may use a specified amount or amounts for M&IE paid or incurred while2006 U.S. Tax Ct. LEXIS 32">*54 traveling away from home in lieu of substantiating the actual costs under section 274(d). ¹²

For purposes of section 1.274-5(g) and (j)(1) and (3), Income Tax Regs., Rev. Proc. 2000-39, 2000-2 C.B. 340, Rev. Proc. 2001-47, 2001-2 C.B. 332, Rev. Proc. 2002-63, 2002-2 C.B. 691, 127 T.C. 124">*135 and Rev. Proc. 2003-80, 2003-2 C.B. 1037 (hereinafter referred to collectively as the revenue procedures), ¹³ authorize various methods a taxpayer may elect to use, in lieu of substantiating actual expenses, for deemed substantiation of the taxpayer's M&IE incurred while traveling away from home. ^{142006 U.S. Tax Ct. LEXIS 32">*55}

Section 4.03 of the revenue procedures provides:

Respondent concedes petitioner substantiated the time, place, and business purpose of the travel and may use the Federal M&IE rate for the locality of travel for each day or partial day that petitioner was away from home. However, respondent argues that because petitioner was not away from home for as many as 24 hours in 1 day, only three-fourths of the Federal M&IE rate is allowable as a deduction during the off-peak-season turnaround voyages completed within 24 hours.

Section 6.04 of the revenue procedures states that a full Federal M&IE rate for the locality of travel is available for a full day of travel from 12:01 a.m. to 12 midnight. To determine the amount of M&IE deemed substantiated2006 U.S. Tax Ct. LEXIS 32">*57 under section 4.03 of the revenue procedures for partial days of travel, section 6.04 of the revenue procedures provides that either of 127 T.C. 124">*136 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 accordance2006 U.S. Tax Ct. LEXIS 32">*58 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).

2006 U.S. Tax Ct. LEXIS 32">*59 In particular, the method in section 6.04(2) of the revenue procedures allows the taxpayer to prorate the Federal M&IE rate using any method that is consistently applied and is in accordance with reasonable business practice. In the example, even though both days are partial days, a taxpayer is allowed to use 2 full days of the Federal M&IE rate for travel away from home for 15 hours the first day (9 a.m. to midnight), and 17 hours the second day (midnight until 5 p.m.).

Petitioner consistently applied the full Federal M&IE rate to all off-peak-season voyages requiring him to be away from home for 15 to 17 hours a day. Considering the length of petitioner's workday, allowing petitioner to use the full Federal M&IE rate may be treated as in accordance with reasonable business practice by analogy to the example.

Therefore, the Court finds petitioners may treat as substantiated the full Federal M&IE rate pursuant to section 127 T.C. 124">*137 6.04 of the revenue procedures for the days petitioner incurred expenses while away from home during the off-peak-season voyages to Victoria with 6- to 7-hour layovers.

Petitioner argues that respondent is precluded from2006 U.S. Tax Ct. LEXIS 32">*60 asserting he must reduce the allowable M&IE deduction by 50 percent as required by section 274(n)(1) because respondent raised it for the first time in his opening brief.

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">76 T.C. 708, 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 limitation2006 U.S. Tax Ct. LEXIS 32">*61 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 section 4.03 of the revenue procedures. Therefore, his M&IE incurred during the years at issue are subject to the section 274(n)(1) 50- percent limitation.

In the alternative, petitioner argues that if the 50-percent limitation under section 274(n)(1) applies, he is eligible for 127 T.C. 124">*138 an exception. Section 274(n)(2) provides that paragraph (1) shall not apply to any expense if:

(E) such expense is for food or beverages --

(i) required by any Federal law to be provided to crew members of a commercial vessel,

(ii) provided to crew members of a commercial vessel --

(I) which is operating on the Great Lakes, the Saint2006 U.S. Tax Ct. LEXIS 32">*62 Lawrence Seaway, or any inland waterway of the United States, and

(II) which is of a kind which would be required by Federal law to provide food and beverages to crew members if it were operated at sea,

* * *

Clauses (i) and (ii) of subparagraph (E) shall not apply to vessels primarily engaged in providing luxury water transportation (determined under the principles of subsection (m)). * * *

The evidence failed to show he qualified for an exception to the section 274(n)(1) 50-percent limitation. He did not demonstrate the company was required by any law to provide food or beverages to him or that the Clipper, the Clipper III, or the Lewis and Clark was a vessel of a kind that would have been required by Federal law to provide food and beverages to its crew members if it operated at sea. Therefore, this Court concludes that section 274(n)(1) limits petitioner's deduction of his allowable M&IE to 50 percent. ¹⁷

2006 U.S. Tax Ct. LEXIS 32">*63 The Court, in reaching its holding, has considered all arguments made and concludes that any arguments not mentioned above are moot, irrelevant, or without merit.

To reflect the foregoing,

Decision will be entered under Rule 155.