- 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 amountPage: Previous 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Next
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