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Section 1.83-6(a)(3)(second sentence), Income Tax Regs.,
provides that section 83(h) and the regulations thereunder do not
apply to "a transfer to an employee benefit plan described in
� 1.162-10(a)". Section 1.162-10(a), Income Tax Regs.,6 provides
that, as a general rule, a taxpayer may deduct vacation pay and
severance pay under that section. However, deductions for
amounts used to provide benefits under a "deferred compensation
plan of the type referred to in section 404(a) * * * shall be
governed by the provisions of section 404 and the regulations
issued thereunder." Sec. 1.162-10(a)(third and fourth
sentences), Income Tax Regs.
6 Sec. 1.162-10(a), Income Tax Regs., provides:
Certain employee benefits.
(a) In General. Amounts paid or accrued by a
taxpayer on account of injuries received by employees
and lump-sum amounts paid or accrued as compensation
for injuries are proper deductions as ordinary and
necessary expenses. Such deductions are limited to the
amount not compensated for by insurance or otherwise.
Amounts paid or accrued within the taxable year for
dismissal wages, unemployment benefits, guaranteed
annual wages, vacations, or a sickness, accident,
hospitalization, medical expense, recreational,
welfare, or similar benefit plan, are deductible under
section 162(a) if they are ordinary and necessary
expenses of the trade or business. However, except as
provided in paragraph (b) of this section [not
applicable herein], such amounts shall not be
deductible under section 162(a) if, under any
circumstances, they may be used to provide benefits
under a stock bonus, pension, annuity, profit-sharing,
or other deferred compensation plan of the type
referred to in section 404(a). In such an event, the
extent to which these amounts are deductible from gross
income shall be governed by the provisions of section
404 and the regulations issued thereunder. [Emphasis
added.]
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Last modified: May 25, 2011