I had the same problem when I first tried LFS. Looking back, the instructions were simple, but I was just a little confused.
I make a directory inside of the lfs partition named $LFS/sources and put all of the source files in there. Then I cd to $LFS/sources. From there, unpack the package that you are about to be working on which will create a directory of that name. You will then cd into that directory and be at the place where the instructions begin for that chapter. So, for the Binutils chapter you will do something like this:
Code:
cd $LFS/sources
tar -xvf binutils-2.20.tar.bz2
cd binutils-2.20
You then can follow all the instructions for the chapter for Binutils. After you finish that chapter:
Code:
cd $LFS/soucres
rm -r binutils-2.20
Then you can go on to the next chapter. This pattern will work for the rest of the book.