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of what is commonly called a "use-or-lose" provision in the plan.
This provision requires participants to use their allocated
vacation benefits by the end of the calendar year. If a
participant fails to use all of the allocated leave, he receives
no compensation for the unused leave remaining at the calendar
yearend, and it cannot be carried over to the next year. Indeed,
it appears to us that the principal reason for allowing an
employee to take all of his leave as of January 1 is to ensure
that all employees were able to take all of their leave
entitlement without creating scheduling conflicts and without
forfeiture. The use-or-lose provision applies to all leave
allocated to an employee and does not distinguish between taxable
yearend "vested" and "nonvested" benefits.
Due to the use-or-lose provision, there is no assurance as
of the close of the taxable year that all otherwise "vested"
vacation benefits will be used by participants by the end of the
calendar year. Nevertheless, while the mere possibility of
forfeiture would have precluded a deduction under the strict
accrual doctrine espoused in Rev. Rul. 54-608, supra, respondent
did not limit petitioner's deductions to yearend fixed and
nonforfeitable vacation benefits in the instant case. Rather,
she allowed deductions to the extent they were based on services
performed in that taxable year.
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