- 45 -
taxable year determines only whether the pay is accrued or
vested, not whether it is earned. Petitioner submits that, when
stripped of its trappings, respondent's position is simply that
"earned" means accrued, which thereby renders section 463
meaningless.
Respondent, on the other hand, contends that nothing in
section 463 signals that vacation pay is earned simply because
the employer permits its employees to take vacations. Respondent
acknowledges that, under the terms of the General Plan, whether
vacation pay was earned happened to coincide with whether it had
vested. Nevertheless, she states that, in making her
determination, she was not swayed by inappropriate factors such
as whether the vacation benefits were vested, nonvested, or
contingent, or whether the vacation benefits were subject to
conditions subsequent or precedent.
The Court is persuaded that respondent did not rely on a
strict accrual doctrine in contravention of section 463 in
disallowing certain deductions for TYE 8701 and TYE 8801 under
the General Plan. Strict accrual would prohibit any deduction if
a possibility existed that the vacation benefits could be
forfeited after the end of the taxable year. See Rev. Rul. 54-
608, 1954-2 C.B. 8. Such a possibility exists even for the
taxable yearend "vested" benefits under the General Plan, because
Page: Previous 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 NextLast modified: May 25, 2011