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indirect future benefits, which do not require capitalization.
See INDOPCO, Inc. v. Commissioner, supra at 87.
In contrast, VEBA II was the funding medium for petitioner's
future holiday pay obligations. These future obligations were
contingent upon the future performance of services by
petitioner's employees. Holiday pay is closely akin to salary,
the most basic obligation any employer undertakes. The $20
million contribution to VEBA II provided funds to reimburse
petitioner for holiday pay obligations that it expected to incur
for many years into the future.
The employees in Moser v. Commissioner, supra, and Schneider
v. Commissioner, supra, generally had a vested right to the
severance, disability, or death benefits at the time the employer
made the contribution. The occurrence of a qualifying event,
such as the death, disability, or termination of an employee,
entitled the employee to benefits regardless of the fact that the
employee would no longer be providing services to the employer.
In contrast, the creation of the VEBA II trust to fund holiday
pay benefits did not provide petitioner's employees with a vested
right to future holiday pay. Petitioner could reduce its holiday
pay benefits or even liquidate the VEBA II trust without
incurring any liability to its employees for future holiday
pay.12 The right to holiday pay did not vest unless and until an
12On Jan. 1, 1995, petitioner adopted a new "paid time away
(continued...)
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