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Background
This case was submitted fully stipulated under Rule 122.1
The stipulation of facts and supplemental stipulation of facts
are incorporated herein by this reference and found accordingly.
Petitioner, an accrual basis taxpayer, is a corporation with
over 1,300 employees that, at the time of the filing of the
petition, had its principal place of business in Baltimore,
Maryland. It filed timely Federal income tax returns for the
years at issue with the Internal Revenue Service Center,
Philadelphia, Pennsylvania.
Petitioner had in place a vacation plan, whereby vacation
earned in the first year could only be taken between January 1st
and December 31st of the following year. Terminated employees
could get cash for their unused vacation pay with proper notice
to petitioner. Petitioner also had a plan of severance pay in
the event employees were laid off.
On March 13, 1992, petitioner purchased an irrevocable
standby letter of credit in the amount of $2,092,421 representing
accrued 1991 liabilities of $1,773,183 for vacation pay and
$319,238 for severance pay. Petitioner's employees were
designated as the beneficiaries with each employee and the amount
of the accrued benefit to which he or she was entitled separately
1 Unless otherwise indicated, all section references are to the
Internal Revenue Code in effect for the taxable years in issue,
and all Rule references are to the Tax Court Rules of Practice
and Procedure.
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