- 19 -
the taxpayer for a period of time in the future, then
the expenditure is deemed capital and cannot be
currently deducted. See National Starch & Chemical
Corp. v. Commissioner, 918 F.2d 426 (3d Cir. 1990),
affg. 93 T.C. 67 (1989), cert. granted INDOPCO, Inc. v.
Commissioner, 500 U.S. ___, 59 U.S.L.W. 3769 (May 13,
1991). [Schneider v. Commissioner, supra.]
Applying these principles to the facts in Schneider v.
Commissioner, supra, we determined that the taxpayer was entitled
to a deduction pursuant to section 162(a). First, we found that
the assets contributed by the employer were held in trust to
provide the benefits discussed above, and none of the employee
benefit plans allowed for the reversion of assets to the employer
in the event the plan was amended or terminated.
Second, we found that the employer's contributions to these
plans directly benefited its employees and that any future
benefit that the employer would derive from its contributions was
based solely on the expectation that its employees were more
likely to remain loyal and perform to the best of their abilities
if their economic needs were satisfied. In our view, such a
benefit was only an incidental or indirect benefit, and therefore
not controlling. See Weil v. Commissioner, supra at 879-880;
Elgin Natl. Watch Co. v. Commissioner, 17 B.T.A. 339, 358 (1929),
affd. 66 F.2d 344 (7th Cir. 1933).
We also rejected the Commissioner's argument that the
taxpayer's contributions were essentially prepaid expenses, which
were required to be capitalized. We found that the annual
Page: Previous 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 NextLast modified: May 25, 2011