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exception to the general rule for deferred compensation
and deferred benefits pursuant to which an employer is
allowed a deduction for the taxable year of the
employer in which ends the taxable year of the employee
in which the compensation or benefit is includible in
gross income. [H. Conf. Rept. 100-495, 920 (1987),
1987-3 C.B. 193, 201; emphasis added.]
Respondent argues that this change, coupled with the absence
of any reference to funded and vested amounts, shows that the
conference committee (and hence the Congress which enacted the
added sentence) intended to exclude such amounts from payment and
permit only actual "cash in pocket" to be considered as having
been paid. Again, we disagree. A careful reading of the
conference committee report shows that the committee was making a
change only in the timing of the deduction in respect of vacation
pay in contrast to the timing of other deferred compensation
payments, and then only in the context of clear recognition that
its change applied only to payments after the 2-1/2 month period.
Having found our way through the statutory briarpatch of
sections 83, 162, and 404 and the regulations thereunder, it is
obvious that the disposition of this case turns on a single,
straightforward question, namely whether petitioner paid the
vacation and severance pay within the 2-1/2 month period.
Viewing the totality of the statutory and regulatory provisions
and the pertinent legislative history in their entirety, we think
that petitioner did so by means of an irrevocable parting of
funds, through the creation of the letter of credit, with the
separately designated employee-beneficiaries, which was not
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