- 39 -
section) be deductible under section 162(a) as an
accrued expense. * * * [Emphasis added.]
The Tax Reform Act of 1986, Pub. L. 99-514, sec. 1165(a), 100
Stat. 2511, amended section 463(a)(1) for tax years beginning
after December 31, 1986. Prior to the amendment, the section
read "and expected to be paid during the taxable year or within
12 months following the close of the taxable year" in lieu of the
underscored language above.
For our present purposes, it is helpful to review the
history of vacation pay liability deductions antedating the
enactment of section 463 by the Act to Amend the Tariff Schedules
of the United States, Pub. L. 93-625, sec. 4(a), 88 Stat. 2108,
2109, for taxable years beginning after December 31, 1973. Prior
to 1954, in 2 published rulings under the 1939 Code, I.T. 3956,
1949-1 C.B. 78 and G.C.M. 25261, 1947-2 C.B. 44 (no date given),
the IRS ruled that liability for vacations with pay may, with
respect to some employees, be terminated, if the employment
relationship is severed prior to the scheduled vacation period.
Nevertheless, it is stated that this contingency should not
preclude "the accrual of vacation pay at the end of the taxable
year in which the services are performed, since, with respect to
the individual employee at the end of such year, the employer
would be justified in anticipating that the liability will be
paid". I.T. 3956, 1949-1 C.B. 78 (emphasis added).
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