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vacation benefits would fully vest by the May 1 following the end
of those taxable years. Respondent disputes Acme Markets'
inclusion of the nonvested benefits when calculating its vacation
pay accruals under section 463.
Respondent correctly focused solely on the services
performed by the end of the taxable year rather than the
substantive rights of plan participants at the close of such
year. To wit, respondent allowed petitioner a deduction based on
three-fourths of the unpaid yearend vacation benefits despite the
fact the plans did not permit employees to take leave before the
service requirements were fully met, and no benefits were
actually granted until 3 months after the close of petitioner's
taxable year.
For each of the plans, although respondent did not acquiesce
in petitioner's excessively broad interpretation of section 463,
neither did she disregard statutory language and legislative
history which sought to liberate accruals of vacation pay from
the strictures of Rev. Rul. 54-608.
C. Petitioner's Attempt To Equate the Deductions At Issue with
Deductions Allowed in I.T. 3956 Is Unavailing
We agree with petitioner that the legislative history
discussed supra makes clear that section 463 was meant to apply
to the type of vacation pay plan at issue in I.T. 3956, 1949-1
C.B. 78. However, we are not convinced by petitioner's
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