- 38 -
in furtherance of such a dubious goal. We therefore hold that
pension contributions, based on units of service worked after the
close of TYE 8801 and before October 17, 1988, were not "on
account of" TYE 8801, as required by section 404(a)(6), and are
therefore not deductible in that year.
Issue 2. The Vacation Pay Deductions
We now turn to the issue of whether certain vacation
benefits were "earned" pursuant to section 463 by the end of TYE
8701 and TYE 8801 such that petitioner could take deductions for
vacation pay liabilities in those years. Section 463 was
repealed by section 10201(a) of the Omnibus Budget Reconciliation
Act of 1987, Pub. L. 100-203, 101 Stat. 1330-387, effective for
taxable years beginning after December 31, 1987.
Prior to repeal, section 463 provided as follows:
(a) Allowance Of Deduction.-- At the election of a
taxpayer whose taxable income is computed under an
accrual method of accounting, if the conditions of
section 162(a) are otherwise satisfied, the deduction
allowable under section 162(a) with respect to vacation
pay shall be an amount equal to the sum of--
(1) a reasonable addition to an account
representing the taxpayer's liability for vacation pay
earned by employees before the close of the taxable
year and paid during the taxable year or within 8 1/2
months following the close of the taxable year * * *
* * * * * * *
Such liability for vacation pay earned before the close
of the taxable year shall include amounts which,
because of contingencies, would not (but for this
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