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employee was employed by petitioner on the working days
immediately preceding and following the holiday. Thus, the
prefunding of petitioner's future holiday pay obligations was
inextricably linked to acquiring the future benefits that
petitioner would reap from its employees' services in subsequent
years.
In Moser v. Commissioner, supra, the contribution was an
amount that provided for full funding of the vested severance
benefits. This funding also generated income sufficient to pay
relatively small annual insurance premiums for other VEBA
benefits. In Schneider v. Commissioner, supra, the taxpayer's
contribution to each plan for a particular year related only to
the year in which the payment was made. Petitioner's
contribution, on the other hand, did not fund benefits that were
already vested and was not calculated to fund benefits for a
specific period. Petitioner established VEBA II to prefund its
holiday pay obligations for many years, and the future benefits
from this prefunding were far from incidental. Between 1986 and
1994, petitioner's annual holiday pay expenses covered by the
plan ranged from approximately $1.5 million to $2.2 million.
Petitioner's original $20 million contribution produced
investment earnings sufficient to cover over 80 percent of these
12(...continued)
from work policy". As a result, only 6 holidays are now covered
under the holiday pay plan and funded through the VEBA II trust.
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