Connecticut Mutual Life Insurance Company and Consolidated Subsidiaries - Page 24

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          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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