- 52 -
any potential deduction pursuant to the formula in the statute.11
As stated in the Senate Finance Committee report: "The allowable
deduction is the amount which the employee is required to
recognize as income." S. Rept. 91-552, supra at 123, 1969-3 C.B.
at 502. (Emphasis added.) As we stated in Duncan Indus., Inc.
v. Commissioner, 73 T.C. at 285:
Section 83(h) expressly allows the person for whom the
services were performed to deduct an amount equal to
the amount includable in the service performer's income
under section 83(a). * * * [Emphasis added.]
The only other requirement concerns timing.12 The majority
argues that subparagraph (3) is only an exception to the
statutory timing provision. But that is the only statutory
requirement that is conceivably in issue.
We recently addressed the exception contained in
subparagraph (3). In Schmidt Baking Co. v. Commissioner, 107
T.C. 271 (1996), the taxpayer-employer's taxable year ended on
December 28. The taxpayer deducted vacation and severance pay
that it had accrued as of December 28, 1991, on its return for
11The majority makes no attempt to link the regulatory
withholding requirement to the statutory provisions regarding the
amount of any deduction and, indeed, there is no linkage.
12As stated in Duncan Indus., Inc. v. Commissioner, 73 T.C.
266, 285 (1979):
Section 83(h) is a modification of section 162 which
only affects the time and amount of deductions
otherwise allowable, when property is transferred in
connection with services. * * * [Emphasis added.]
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