Connecticut Mut. Life Ins. Co. v. Commissioner
United States Tax Court
P created a voluntary employees' beneficiary association (VEBA) trust designed to fund P's future holiday pay obligations to its employees. On or about Dec. 27, 1985, P contributed $ 20 million to the VEBA. This $ 20 million contribution significantly exceeded the amount of P's average annual holiday pay obligation, which was approximately $ 2 million.
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P created a voluntary employees' beneficiary association (VEBA) trust designed to fund P's future holiday pay obligations to its employees. On or about Dec. 27, 1985, P contributed $ 20 million to the VEBA. This $ 20 million contribution significantly exceeded the amount of P's average annual holiday pay obligation, which was approximately $ 2 million. P deducted the entire $ 20 million contribution as an ordinary and necessary business expense on its 1985 Federal income tax return. Held: P's $ 20 million contribution to the VEBA in 1985 provided P with substantial future benefits. P is…
1Opinion of the Court
Ruwe, Judge:
Respondent determined a deficiency of $7,372,712 in petitioner’s 1985 Federal income tax. The sole issue for decision is whether petitioner is entitled to a 1985 deduction for its $20 million contribution to a voluntary employees’ beneficiary association (veba) trust. In order to prevail, petitioner must establish that the $20 million contribution was an ordinary and necessary business expense under section 162(a).1
FINDINGS OF FACT
Some of the facts have been stipulated and are so found. The stipulation of facts is incorporated herein by this reference. At the time its petition was…
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