Throughout this document, we will assume that all the packages that were downloaded are placed somewhere in $LFS/usr/src.
While it doesn't matter at all where you save the downloaded packages, we recommend storing it at least on the LFS partition. This just makes sense because you need to have access to those those files when you chroot to $LFS and when you boot into the LFS system, although access when booted to $LFS could be handled other ways. $LFS/usr/src is just a logical place to store source code, but by no means a requirement. You may even want to create a subdirectory under $LFS/usr/src for tarball storage. That way you can separate tarballs from temporary build directories, but again that's up to you.
The next chapter contains a list of all the packages that need to be downloaded. The LFS partition isn't created yet, so you can't store it there yet. Just save it elsewhere for now, and when the LFS partition is created, move them over.