Connecticut Mutual Life Insurance Company and Consolidated Subsidiaries - Page 15

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          of petitioner's annual holiday pay obligations.  We believe this            
          is a very conservative estimate considering the fact that average           
          annual holiday pay covered by the plan for the years 1986 through           
          1994 was approximately $2 million.  At that rate, the $20 million           
          fund would last for 10 years even if it generated no investment             
          income.  In fact, investment earnings from VEBA II have covered             
          over 80 percent of petitioner's holiday pay obligations between             
          1986 and 1994.10                                                            
               Petitioner, nevertheless, argues that its contribution                 
          should be deductible because it is the employees, rather than               
          petitioner, who benefited from the creation of the VEBA and that            
          any future benefit to petitioner was merely incidental.  In                 
          support of its position, petitioner relies on two prior decisions           
          of this Court in which we permitted employers to deduct VEBA                
          contributions pursuant to section 162(a).                                   
               In Moser v. Commissioner, T.C. Memo. 1989-142, affd. on                
          other grounds 914 F.2d 1040 (8th Cir. 1990), we held that a                 
          corporation was entitled to a deduction pursuant to section                 
          162(a) for a $200,000 contribution to a VEBA created to provide             
          members with death benefits, sick and accident benefits, and                


               10Petitioner has avoided using any of the original principal           
          to pay its holiday pay obligations.  Since 1987, the annual                 
          investment earnings from the VEBA II trust have been insufficient           
          to cover the total annual cost of petitioner's holiday pay                  
          obligations.  To make up the difference, petitioner has either              
          transferred funds from VEBA I or VEBA III or funded the                     
          difference itself.                                                          




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