- 14 -
Id. at 87. The Supreme Court went on to hold that capitalization
is also required when the expenditure provides the taxpayer with
significant benefits beyond the year in which the expenditure is
incurred. Id. at 87-89. The Court cautioned, however, that "the
mere presence of an incidental future benefit--'some future
aspect'--may not warrant capitalization". Id. at 87. Applying
these principles to the case at hand, we must inquire into the
duration and extent of any benefits that petitioner received as a
result of its $20 million contribution to the VEBA II trust in
1985. See Black Hills Corp. v. Commissioner, 73 F.3d 799, 806
(8th Cir. 1996), affg. 102 T.C. 505 (1994); A.E. Staley
Manufacturing Co. v. Commissioner, 105 T.C. 166, 194 (1995).
Petitioner has provided its employees with fixed paid
holidays for the past 150 years. This holiday pay was a quid pro
quo for the employees' services. Petitioner's employees were
paid for a designated holiday only if they were employed by
petitioner on the working days immediately preceding and
following the holiday.
Through its contribution to the VEBA II trust, petitioner
effectively prefunded a substantial portion of its anticipated
holiday pay obligations for many years to come. Petitioner's own
expert witness, Stanley B. Rossman, opined that petitioner's $20
million contribution in 1985 was sufficient to pay holiday pay
benefits for 8 to 10 years. Mr. Rossman assumed that both income
and principal from VEBA II would be used to fund the full amount
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