- 24 -
excessive tax-free accumulation of funds.'" Schneider v.
Commissioner, supra (quoting H. Rept. 98-432 (Pt. 2), at 1275
(1984)). We also referred to the conference report accompanying
the enactment of sections 419 and 419A, which stated that "'An
employer's contribution to a fund that is a part of a welfare
benefit plan may be deductible in the year it is made rather than
at the time the benefit is provided.'" Schneider v.
Commissioner, supra (quoting H. Conf. Rept. 98-861, at 1154
(1984), 1984-3 C.B. (Vol. 2) 408).
The discussion of sections 419 and 419A in Schneider v.
Commissioner, supra, is not inconsistent with our holding in the
instant case. Under the law applicable to pre-1986 years, there
simply was no requirement that deductions for contributions to
VEBA's be delayed until benefits were actually paid to the
employees. Sections 419 and 419A imposed this requirement for
contributions made after 1985. However, as we recognized in
Schneider, there had always been a requirement that an
expenditure be capitalized if the expenditure provided the
taxpayer with substantial future benefits. In Schneider v.
Commissioner, supra, we found that the expenditures in issue had
not provided the taxpayer with substantial future benefits. In
the instant case, we have found that petitioner's contribution to
VEBA II did result in substantial future benefits. Our decision
today, therefore, is consistent with Schneider v. Commissioner,
supra, and the state of the law in 1985. As the Supreme Court
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