
    MISSISSIPPI RIVER FUEL CORPORATION v. THE UNITED STATES
    [No. 180-60.
    Decided April 5, 1963]
    
      
      Christian B. Peper for plaintiff.
    
      John B. Jones, Jr., with whom was Assistant Attorney General Louis F. Cberdorfer, for defendant. Edward S. Smith, Lyle M. Turner, Philip B. Miller and George Willi were on the brief.
    Before JoNes, Chief Judge; Whitaker, Laramore, Dureee, and Davis, Judges.
    
   JONES, Chief Judge,

delivered the opinion of the court:

The plaintiff seeks as a business deduction from its gross income of 1953 amounts which it had contributed by transfer to an employees savings trust fund. These sums had been added over a 3-year period as a matching fund to a like amount voluntarily contributed by participating employees. The total accumulated funds were distributed and paid to the employees in the year 1953 on a percentage basis in proportion to their respective contributions. The sums had been contributed to the trust fund during the previous three years. No part of the funds were to be returned to the plaintiff. There is no dispute as to the expense incurred by the plaintiff. The defendant asserts that in tlie facts of this case and under the terms of the instrument and the wording of the applicable statute plaintiff is not entitled to a deduction. The plaintiff disputes this. Admittedly no deduction has been allowed at any time.

The plaintiff at all pertinent times was engaged in the sale of natural gas and operated an interstate pipeline transporting gas.

On January 4,1950, the plaintiff duly established the Mississippi Fiver Fuel Corporation Savings Trust with the Mercantile-Commerce Bank & Trust Company as trustee.

According to the terms of the duly authorized trust instrument, any employee of the company with one year’s service was given the privilege of permitting a deduction from his salary of any sum designated by such employee not exceeding $25 per month, and to have such amount transferred to the trust. A record was to be kept of the amount so contributed by each participating employee. It was agreed that the plaintiff would match any amount of any employee’s contribution by contributing a like sum to the trust.

The trust was to terminate on December 31, 1952, and within 30 days thereafter each remaining participant was to be paid from the trust his own contributions plus the matching contributions by the plaintiff for his benefit, together with his pro rata share of the earnings of the trust. If the participant’s employment were terminated because of death, retirement, disability, or layoff, he was to receive from the trust the amount contributed by him plus the amount contributed by the plaintiff. If any participant voluntarily resigned, or was discharged for cause, or withdrew from the trust he was to receive only his own contributions to the trust. In that event the amount which the plaintiff had contributed to match his savings was to be added to the sum available for others who continued to comply with the terms of the trust instrument.

In no instance was the plaintiff to receive back any sums that had been contributed to the matching program.

According to the terms of the trust instrument, the trust was to be in effect through the years 1950, 1951, and 1952.

The funds were distributed to the remaining participants by the trustee on January 2, 1953. The parties have stipulated that all of the contributions made by the plaintiff were paid from the trust during the early part of 1953.

For the years 1950,1951, and 1952, respectively, the plaintiff deducted the respective contributions made to the savings trust in each of those years. The Commissioner of Internal Eevenue disallowed each of these deductions.

The plaintiff litigated the right to a deduction for its contribution in 1950 in the Tax Court which decided adversely to plaintiff in 29 T. C. 1248 (1958). It litigated its contributions for the years 1951 and 1952 in Mississippi River Fuel Corporation v. Koehler, 164 F. Supp. 844 (1958). The deductions were denied and the decision was affirmed by the United States Court of Appeals, 8th Circuit, 266 F. 2d 190, cert. denied 361 U.S. 827 (1959). In each instance it was held that the deferred compensation was not deductible during the years 1950, 1951, and 1952. These cases involved only the immediate deductibility as the contributions were made in the three years mentioned.

The case of Wesley Heat Treating Co. v. Commissioner, 267 F. 2d 853 (1959), is clearly distinguishable on the facts from the case at bar.

Plaintiff filed a timely claim for refund of taxes paid in 1953 on the ground that the contributions were deductible because the actual payment was made during that year.

The latter issue is now before the court for determination. The applicable portion of the statute in relation to deductions is set out in the footnote. The parties have agreed that the contributions made by plaintiff to the Mississippi River Fuel Corporation Savings Trust in the years 1950-1952, inclusive, constituted deferred compensation reasonable in amount for the services actually rendered by that employee.

It will be noted that generally speaking all ordinary and necessary expenses incurred during the taxable year are normally allowed as a business deduction. However, under the terms of section 23 (p) of the 1939 Code (26 TJ.S.C. § 23 (1952 ed.)) certain specific provisions or modifications are made for trust or annuity plans and deferred payment plans. In such cases deductions are to be permitted under the terms of section 23(p)(l)(A), (B), (C), or (D). The deductions under the provisions of section 23 (p) (1) (A), (B), and (C) for the current years 1950, 1951, and 1952 have been decided adversely to the plaintiff in the cases to which reference is made above.

This leaves a sole issue in this case: whether a deduction is permitted under subparagraph (D) which stipulates that deduction may be allowed in cases of deferred payment plans under the following conditions:

(D) In tbe taxable year when paid, if the plan is not one included in paragraphs (A), (B), or (C), if the employees’ rights to or derived from such employer’s contribution or such compensation are nonforfeitable at the time the contribution or compensation is paid.

This court held in the case of Russell Manufacturing Company v. United States, 146 Ct. Cl. 833, 175 F. Supp. 159 (1959), involving this issue, that the payment became non-forfeitable as to participating employees in the year when payment by distribution is actually made to the employee. The defendant asks that we overrule our decision in Bussell Mawufactwring Company, but after consideration we adhere to the principles enunciated in that case. It is not only in accord with the wording of the law, but produces a just and nondiscriminatory result.

We held in the Russell Manufacturing Company case that the payments, whether or not nonforfeitable during the'current or accumulating years, became nonforfeitable during the year when the funds , were actually paid to the employees. By that time all the rights of the employees to participate in the funds had matured, and all the contingencies had been met. There was nothing left but to make payment, and necessarily the obligations of the instrument were then non-forfeitable. That was the time actual payment was made.

In the instant case 1953 was the year when payment was made by distribution and the trust was liquidated. It is true two other similar trust instruments followed serially in two subsequent periods of three years each, but each was a complete program in itself and no one program was in any way dependent upon the other, even though all employees had the privilege of participation on an equal basis in any or all of them.

If the defendant prevails the plaintiff would not be- entitled to any deduction for contributions to this fund for the employees no matter how worthy the plan might be. To offer incentives or rewards for loyal, faithful, and efficient service is in accord with the best traditions of a free country. In . addition, this method of cultivating good will and good public relations is frequently used in different forms by many successful business concerns.

To refuse to allow any deduction whatever for money spent in such a fashion would be to deny ordinary expenses to a business concern that was utilizing progressive methods of business. It would put a premium on a concern that selfishly refused to adopt an incentive plan and a penalty on the more advanced business organization which was willing to make such a provision. Such a deduction for expenditures actually made for a worthy business purpose should not be denied unless the language of the statute compelled such a course. We do not think it does.

In fact, we think it rather clear that the provisions of section 23 (D) were inserted by the Congress for the purpose of caring for such a situation. It specifically provides that the expenditure shall be the basis for deductions in the year when paid. On this particular phase we quote from our opinion in Russell Manufacturing Company v. United States, supra, at page 839, as follows:

The language of the statute bears out this construction. Section 23 (p) (1) (D) provides that “compensation” paid an employee under a nonqualifying plan (as distinct from a “contribution” paid by an employer to a stock-bonus, pension, profit-sharing, or annuity plan) shall be deductible:
“In the taxable year when paid * * *, if the employees’ rights to or derived from * * * such compensation are nonforfeitable at the time the * * * compensation is paid.” [Emphasis supplied.]
No one will deny that the compensation involved in the case at bar was nonforfeitable at the time it was paid to employee-beneficiaries. The defendant, however, takes the position that the phrase, “in the taxable year when paid,” should read “in the taxable year when paid by the employer.” The defendant then argues that if the compensation is paid by a trustee it is not compensation “paid by the employer,” and is therefore not deductible. The short answer to this is that the' statute makes no such provision.

The defendant suggests the issue that the payments were actually made by the trustee rather than by the plaintiff. This is invoking form rather than substance. As a matter of fact the wording of section 23 (p) (1) strongly indicates a congressional anticipation that “compensation” would be paid by a trustee, and a congressional intention that compensation paid by a trustee should be deductible. In the first paragraph of section 23 (p) (1) the Congress refers to “contributions” “paid by an employer,” whereas “compensation” is mentioned, significantly we think, without any reference to the person who hands the compensation over to the employee.

The defendant now adds to the legislative history of section 23 (p) some excerpts from the 1942 testimony of a Treasury expert and comment by one Member of the Congress. Neither of these discloses congressional intent. It becomes apparent from a reading of the reports of the Committees and other comments that what the Congress had in mind was to prevent the abuses which had arisen sometimes where there were longtime annuity payments and continuing pensions, and especially in cases where stock options and other plans were accorded to officials of an organization to the exclusion or the disadvantage of the regular employees.

Neither of these difficulties arises here because the same privileges were given to all the employees on the same dead level of equality. There was no advantage to anyone. There is no question of longtime annuities or pension payments, for the plan was ended by its own terms and final payment was made in 1953.

As a matter of fact it is apparent that the Congress was attempting by the 1942 and 1954 provisions to avoid the abuses that sometimes arise in connection with the long-term plans. For the purpose of avoiding inequity between business concerns or denial of actual expenditures properly made it inserted the language of section 23 (p) (1) (D).

This deferred payment plan was in essence a continuing action, somewhat in the nature of an escrow agreement where final action is to await certain happenings, and is sometimes dependent on certain contingencies. While the contribution was made currently, the payment to the employees was not to be finally made until the year 1953 when certainly the obligation became complete and nonforfeitable by anyone, either employer or employee. The matter is thus brought strictly within the terms of subparagraph (D).

If the plaintiff by the terms of the trust instrument had merely made the promise to pay and had not actually placed the money in the hands of the trustee until in 1953, at the time it was paid out and distributed, or if the company had retained the right to revoke at any time before the funds were paid or distributed there woxdd have been no doubt of the right to deduct the expenditure. In fact, the defendant’s counsel had no choice but to admit as much in response to a question during the oral argument.

Strangely enough the Revenue Ruling 55-525, 1955-2 Cum. Bull. 543, would permit just that. Thus we have the anomalous situation where under the regulations the employer who gives his employees the lesser protection is afforded the greater tax benefit.

If the trustee had refused to pay in the year 1953 or if the employer had tried to stop payment there would have been many unhappy employees and probably a multiplicity of lawsuits.

In fact, the deposit of the money by the plaintiff in the hands of the trustee was a better arrangement from the standpoint of the employees than would have been a mere deposit by the employees with a promise to match on the part of the plaintiff because such a plan might have to some extent jeopardized the rights of the employees, especially if the employer had happened to have financial difficulties before the time of the ultimate payment.

A careful reading of the language of the statute shows that subparagraph (D) was clearly intended by the Congress to cover just such cases as we have before us at this time. This particular plan is as free from any possible objections as can be conceived. If this case does not fall within the provisions of subparagraph (D) it is difficult to visualize a case that would qualify.

We find that in so far as any regulation provides for denial of a deduction in this type of case when the rights of the participants remaining in the trust had become completely vested and nonforfeitable on December 31, 1952, before compensation payments were made in January 1953, according to tbe terms of tbe instrument, sucb regulation goes beyond tbe terms of tbe statute and is to tbat extent invalid. We do not find any of tbe reasons presented by tbe defendant as persuasive. Tbe language of the statute itself justifies tbe conclusion we reached in tbe Bussell case, and tbe facts in tbe case at bar and tbe language of tbe statute even more strongly support and justify a similar conclusion. To deny recovery in the case for expenditures actually made in the due course of business would place a penalty upon a business concern that bad established and faithfully carried out a plan of liberal and fair treatment of its employees. We believe that neither tbe wording of tbe statute nor the intent of tbe Congress as reflected in tbe terms of tbe act calls for sucb a conclusion.

Plaintiff is entitled to recover and judgment is entered for plaintiff with the amount of recovery to be determined under Rule 38(c).

Davis, Judge,

concurring:

Tbe central factor in this case, for me, is tbe decision of this court, some tbree-and-a-half years ago, in Russell Manufacturing Co. v. United States, 146 Ct. Cl. 833, 175 F. Supp. 159 (1959). All agree tbat tbat ruling is precisely controlling, unless it is to be overruled as incorrect. Tbe defendant — marshalling all of tbe points supporting its stand — asks the court to take that step. In responding to the invitation, we must start, in my view, with the premise that the disposition of this case cannot be approached as if Russell Manufacturing bad never been decided. The question is not what we would hold if we now took a fresh look but whether we should take that fresh look. A court should not scrutinize its own prior ruling — putting constitutional adjudication, which has its own standards, to one side— merely because, as now constituted, it might have reached a different result at the earlier time. Something more is required before, a reexamination is to be undertaken: (a) a strong, even if not yet firm, view that the challenged precedent is probably wrong; (b) an inadequate or incomplete presentation in the prior case; (c) an intervening development in the law, or in critical comment, which unlocks new corridors; (d) unforeseen difficulties in the application or reach of the earlier decision; or (e) inconsistencies in the court’s own rulings in the field. Where these or like reasons for re-opening are 'lacking, respect for an existing precedent is counselled by all those many facets of stability-plus-economy which are embodied in the principle of stare decisis. Cf. Flippin Materials Co. v. United States, 160 Ct. Cl. 357, 371 (1963), 312 F. 2d 408, 417.

I can find no sufficient reason for a reconsideration here. Certainly, it is far from clear that the Bussell Mamcfactur-ing opinion is wrong, if it be wrong at all; even from the Government’s viewpoint, the issue must be considered very close. By design or inadvertence, the bare language of Section 23 (p) seems to fit snugly with the court’s result, and the legislative history which the defendant offers is not conclusive (though it tends) the other way. The possible disharmony with the general law of taxation in allowing the plaintiff to take a deduction for the payments made in 1953 by another taxable entity (the trustee) would be matched or more than matched (if defendant were to prevail) by the disharmony of altogether disallowing any deduction for a genuine business expense. No basic tax policy is disserved, so far as I can see, by the court’s holding. The Government’s position is narrow. Its primary point is that we should follow this statute as written and that Congress wrote it so as to bar any deduction, at any time for plaintiff’s payments to the fund, even though Slightly altered plans would have allowed deductions. This may possibly be a corre'ct reading of the particular legislation, but it is not clearly so, and no wide or awkward consequences of significance flow from the contrary construction. Defendant stresses the Treasury Begulation which Bussell Manufacturing held invalid, but the normal deference to such regulations is sharply lessened in this instance by the six-year gap between the enactment of Section 23 (p) in 1942 and the 1948 amended regulation on which the Government relies.

There is no other proper basis for reevaluation of the earlier decision. One suggestion is that in .1959 the defendant failed to present the legislative history adequately. But the basic documents and arguments were then before the court; the additions now made are merely peripheral. The claimed direct conflict with Wesley Meat Treating Co. v. Commissioner, 267 F. 2d 853 (C. A. 7, 1959), does not exist. Unlike plaintiff* that taxpayer sought its deductions, not under Section 23 (p) (1) (D), but under Section 23(a) (the general provision for deduction of business expenses under the 1939 Code) ; the Seventh Circuit rightly held that, for employee payments of this general type, Section 23 (p) governs exclusively. The professional comment on Bussell Manufacturing, which appears to be divided, is not such as to induce reconsideration. Nor are there other post-1959 developments which we are asked to take into account.

The net of it is that this is a proper case in which to decline the bid to reexamine our prior ruling. For us, what was decided yesterday should do for today. I join, therefore, in the judgment for the taxpayer, on the authority of the Bussell Ma/rmfacturing decision.

Laramorb, Judge, concurring in the opinion of the court also joins in the concurring opinion.

FINDINGS OF FACT

The court, having considered the evidence, the report of Trial Commissioner Richard Arens, and the briefs and argument of counsel, makes findings of fact as follows:

1. (a) Plaintiff is a corporation duly organized and existing under the laws of the State of Delaware, with its principal office in St. Louis, Missouri. At all pertinent times plaintiff was engaged in the sale of natural gas and owned and operated a gas pipeline extending from Texas into Missouri and Illinois.

(b) Plaintiff kept its books and filed its Federal income tax returns on a calendar year basis and on the accrual basis of accounting.

2. Plaintiff filed its returns for tbe years 1950, 1951, 1952, and 1953 with the Collector or Director of Internal Revenue at St. Louis, Missouri.

3. On January 4, 1950, in accordance with a resolution duly adopted by its board of directors, plaintiff executed a trust agreement with the Mercantile-Commerce Bank & Trust Company, of St. Louis, Missouri, hereinafter referred to as the trustee, in which trust agreement there was established a trust known as the Mississippi River Fuel Corporation Savings Trust.

4. The trust agreement provided in pertinent parts:

(a) That all employees of plaintiff who had been in its continuous employ for one or more years on January 1,1950, were eligible to participate in the trust, and that any other employee of plaintiff who, after January 1, 1950, completed one year’s continuous employment, became eligible to participate on the first day of the month following the date upon which he completed one year’s continuous employment.

(b) That no part of the corpus of the trust fund was to be used for any purposes except the exclusive benefit of the participants.

(c) That each eligible employee who desired to participate in the trust was to execute a written application in which he agreed that for each month that he participated plaintiff was to deduct from his salary an amount specified by the employee in the application in multiples of $5 but not in excess of $25 and that plaintiff was to pay such amount over to the trustee to be credited to the participant’s account.

(d) That plaintiff would contribute to the trustee each month for the account of the participant an amount equal to the amount withheld from the salary of such participant and contributed to the trust by him.

(e) That the interest of any participant was not to be subject to assignment, transfer, pledge or other encumbrance nor subject to attachment, execution, garnishment, levy or other seizure under any legal, equitable or other process, and that in the event of any attempted assignment, transfer, pledge or other encumbrance or any attempted seizure, the participant should cease immediately to be a participant.

(f) That plaintiff would furnish to the trustee a list of employees who elected to participate and the amount of their contributions, and would promptly notify the trustee of any changes, and the trustee was not required to verify such information.

(g) That plaintiff woidd open a separate bookkeeping account for each participant and credit to it the monthly contributions made by the participant and plaintiff.

(h) That in the event of the severance from the employ of plaintiff of a participant by reason of layoff, disability, retirement or death, within 30 days thereafter the participant or his estate would be paid from the trust an amount equal to the total amount contributed to the trust by the participant, plus the equivalent total amount contributed to the trust by plaintiff for the account of such participant.

(i) That in the event of (i) the severance from the employ of plaintiff of a participant by reason of discharge for cause, (ii) a participant’s withdrawal from the trust, (iii) a participant’s voluntary resignation from the employ of plaintiff, or (iv) any attempted assignment, transfer, pledge or other encumbrance or any attempted attachment, execution, or other seizure under legal, equitable or other process, within 30 days thereafter the participant would be paid an amount equal to the total amount contributed to the trust by the participant by means of salary deductions.

(j) That the trust was to terminate on December 31,1952, and within 30 days thereafter each participant remaining in the trust as of December 31,1952, was to 'be paid his pro rata share of the trust fund which was to consist of (i) his own contributions, (ii) the contributions made by plaintiff for his benefit, (iii) his pro rata share of the net earnings of the fund, and (iv) his pro rata share of the contributions made by plaintiff for the benefit of former participants whose rights to such contributions were forfeited. The pro rata share of each participant was to be determined on the basis of the percentage which his contributions to the fund represented of the total contributions to the fund by all participants in the trust as of the termination date.

(k) That all funds of the trust were to be invested in securities issued by the United States or guaranteed as to the payment of principal and interest 'by the United States.

(l) That the trustee was to receive as its compensation out of the earnings of the fund an amount equal to three-fourths of one percent of the total moneys disbursed to participants.

(m) That plaintiff reserved the right by majority vote of its board of directors to amend, suspend or terminate the trust prior to December 31, 1952, provided, that no such amendment, suspension or termination might be retroactive or affect any right or interest of any participant having then accrued and that in the event of termination prior to December 31, 1952, payment of the fund to the participants would be made within 30 days.

(n) That the trustee was to pay out of the income of the fund which remained after payment of its compensation any taxes which might be imposed upon the trust, and in the event the income of the fund was insufficient to pay both the trustee’s compensation and such taxes, plaintiff would pay any additional amount required out of its own funds.

(o) That the sole responsibility of the trustee was to receive, hold, invest and reinvest the funds which came into its possession as trustee and to pay moneys out of the fund in accordance with the written directions of plaintiff.

(p) That nothing contained in the trust agreement was to be deemed to give any participant or employee the right to be retained in plaintiff’s employ, any interest in any specific property of the trust or any interest other than the right to receive payment in accordance with the provisions contained in the trust agreement.

5. The Mississippi River Fuel Corporation Savings Trust was in force and effect throughout the years 1950, 1951, and 1952 and was operated during those years in accordance with the terms of the trust agreement dated January 4,1950.

6. Plaintiff published a summary of its Savings Plan together with a copy of the Trust Agreement of January 4, 1950, in a pamphlet entitled “Savings Plan Effective January 1, 1950” that was distributed to its employees. The summary of the plan as set out in the pamphlet was as follows:

SAVINGS PLAN
I. Eligibility:
All employees who on January 1, 1950 are credited with one or more years of continuous service are eligible to become a member in the Savings Plan on that date. All employees who on January 1,1950 are credited with less than one year’s continuous service, and those engaged or re-engaged thereafter, shall become eligible to become a member on the first of the month following completion of one year’s continuous service, if then actively at work. Employees who are on the inactive list when they are otherwise eligible, will become eligible immediately upon their return to active service.
II. Horn ToJoin:
Participation in the Savings Plan is entirely voluntary. Any eligible employee may become a member in the Savings Plan by authorizing the Mississippi Elver Fuel Corporation (hereinafter called the Company) to make deductions each month from the current compensation due such employee from the Company. The Company shall be authorized to pay over such deductions, together with the Company contribution, to a banking corporation, as trustee, selected by the Company.
III. Members Deductions:
The amount which each member may contribute to the Plan shall not exceed $25.00 per month. Any lesser amount that the member may choose to contribute shall be in multiples of $5.00; that is, he may contribute each month either $5.00, $10.00, $15.00, $20.00, or $25.00.
IV. Oom/pany Contribution:
The Company will pay to the Trustee an amount equal to each member’s monthly payroll deduction.
V. Term of The Flan:
The Savings Plan will commence on January 1, 1950 and shall terminate on December 31, 1952 or at such earlier time as the Board of Directors of the Company shall designate.
VI. Rights of Members:
A. On Termination of the Plan
Each member who participates in the Plan until its termination shall receive:
(1) The total amount of that member’s payroll deductions in respect to the Plan, plus—
(2) An equal sum contributed by the Company, plus—
(3) A pro rata share of the Company contributions, if any, that shall remain in the Savings Plan Fund due to withdrawals of members in accordance with Par. E of this section.
B. Members laid off, disabled, or retired prior to the termination of the Plan.
A member who shall be permanently laid off for no fault of his own or shall leave the service of the Company on account of disability or for other sufficient cause, of which the Company shall be the sole judge, or who shall be retired under the Company’s Eetirement Plan, shall thereupon receive—
(1) The total amount of that member’s payroll deductions in respect to the Plan, plus—
(2) An equal sum contributed by the Company.
Such member shall thereupon cease to be a participant in the Savings Plan.
C. Members Withdrawing Or Discharged.
Any member continuing in the employ of the Company may withdraw at any time from the Savings Plan. A member so withdrawing, and a member who leaves voluntarily the employment of the Company or who is discharged for good cause, of which the Company shall be the sole judge, shall thereupon receive—
(1) The total amount of that member’s payroll deductions in respect to the Plan.
Such member shall thereupon cease to be a participant in the Savings Plan.
D. In Case of Death
In case of the death of a member there shall be paid to his estate — ■
(1) The total amount of that member’s payroll deductions in respect to the Savings Plan, plus—
(2) An equal sum contributed by the Company.
E. Funds Eemaining After Withdrawals
The Savings Plan Fund shall be exclusively for the benefit of the members. All amounts remaining in the Fund at the termination of the Plan which represent Company contributions made for the account of former participants who have ceased to be members and to whom such amounts have not been paid, shall be prorated among the members at the termination of the Plan as described in Par. A (3) of this section.
F. Assignment
The right or interest of a member in the Savings Fund shall not be subject to assignment or transfer.
G. Attachment
If the interest of any member in the Savings Fund shall be levied upon by any legal writ, thereupon such member shall cease to be a member in the Savings Plan and shall have no right or interest in or under the Savings Plan or Savings Fund excepting only the total amount of the payroll deductions theretofore made on account of said member.
H. Satisfaction Of Claims
Payments in accordance with Paragraphs A, B, C, D, and G of this section shall be in full payment and satisfaction of all claims hereunder against the Savings Fund, the Trustee, and/or the Company.
VII. Expense Of The Plan:
The compensation of the Trustee in the administration of the Fund shall be paid from the earnings, if any, of the Fund, provided that if said earnings are insufficient to pay this compensation it shall be correspondingly reduced.
The expenses of collecting and distributing amounts from and to the members and keeping the records with respect to the Fund will be borne by the Company.
VIII. Trastee:
The Trustee, to be selected by the Company, shall be a banking corporation which is a member of the Federal Eeserve System. Said Trustee shall be authorized to invest the Fund in securities of the United States Government or in securities guaranteed by a governmental agency, the maturity dates of which shall be prior to the date of termination of the Savings Plan.
IX. Modification Of The Plan:
The Company hopes and expects that this Plan will continue as described above until its termination on December 31, 1952, but necessarily reserves the right to modify, suspendj or discontinue it at any time. No such Change, suspensions, or discontinuance will be retroactive and no right or interest in the Fund having then accrued to the member shall be affected thereby.
Appendix
Estimated amounts to be received by members in the Savings Plan at the allowable rates of contribution for the full duration of the Plan.

7. Plaintiff did not, either prior to the inauguration of its 1950 savings plan or during the time that such plan was in effect, submit the plan or the related trust to the Internal Revenue Service for its examination or approval; nor did plaintiff request or obtain any ruling from the Internal Revenue Service as to the qualification of the same under Sections 23 (p) and 165 of the 1939 Internal Revenue Code. The existence of the 1950 savings plan did not come to the attention of the Internal Revenue Service until the early part of 1953, when inquiries were made to it regarding the method of taxation of distributions made thereunder.

8. During the year 1950 plaintiff accrued on its books to the account of the then participating employees the sum of $89,190 and paid said sum to the trust, and its employees contributed the same amount to the trust. In that year, in accordance with Article XI of the trust, $1,775 was distributed by the trustee to employees whose employment was severed, $450 of this amount representing plaintiff’s contributions and $1,325 representing employees’ contributions to the trust.

9. During the year 1951 plaintiff accrued on its books to the account of the then participating employees the sum of $104,625 and paid said sum to the trust, and its employees contributed the same amount to the trust. In that year, in accordance with Article XI of the trust, $3,750 was distributed by the trustee to employees whose employment was severed, $1,275 of this amount representing plaintiff’s contributions and $2,475 representing employees’ contributions to the trust.

10. During the year 1952 plaintiff accrued on its books to the account of the then participating employees the sum of $123,855 and paid said sum to the trust, and its employees contributed $122,155 to the trust. In that year, in accordance with Article XI of the trust, $18,975 was distributed by the trustee to employees whose employment was severed, $7,450 representing plaintiff’s contributions and $11,525 representing employees’ contributions to the trust.

11. On January 2,1953, the trustee, in accordance with the terms of the trust agreement of January 4, 1950, duly distributed to the 416 remaining participants in the trust the entire remaining corpus of the trust and its entire net accumulated income in the total sum of $616,963, which sum consisted of $308,495 paid into the trust by plaintiff during the years 1950, 1951 and 1952, $300,645 contributed by employees during the same years, and $7,823.60 of net accumulated trust income.

12. Plaintiff did not report on its own tax returns any of the income earned by the trust created under its 1950 savings plan, including the sum of $7,823.60 mentioned in finding 11, supra. All of the net income of the trust was paid to the participants in the trust, and plaintiff has never claimed any deduction with respect to income so paid.

13. The parties have agreed that the contributions made by plaintiff to the Mississippi Fiver Fuel Corporation Savings Trust during 1950, 1951 and 1952 and which were paid to the employees of plaintiff by the trustee on January 2, 1953, constituted deferred compensation and, with respect to each employee to whom any such deferred compensation was paid, this compensation, plus all other compensation paid or accrued to the employee, constituted reasonable compensation for the services actually rendered by that employee.

14. Plaintiff’s Federal income tax return for the year 1953 was filed on June 15,1954. In said return plaintiff reported a taxable income of $6,664,614.74 and paid taxes thereon accordingly. Plaintiff did not claim deduction on said return for the $308,495 paid to plaintiff’s employees by the trustee on January 2,1953.

15. On its income returns for 1950, 1951 and 1952 plaintiff deducted from gross income the sums of $89,190, $104,625 and $123,855, respectively, those being the respective amounts of its annual contributions paid into the savings trust. The Commissioner of Internal Eevenue disallowed each of these claimed deductions.

16. In Mississippi River Fuel Corp. v. Commissioner, 29 T.C. 1248, plaintiff litigated its right to deduct the amount of its $89,190 contribution on its 1950 returns. The Court upheld the Commissioner’s denial of that deduction.

In Mississippi River Fuel Corp. v. Koehler, 164 F. Supp. 844, plaintiff litigated its right to deduct the amounts of $104,625 and $123,855 contributions on its 1951 and 1952 returns. The Court upheld the Commissioner’s denial of those deductions.

The above decisions were concurrently affirmed by the Court of Appeals for the Eighth Circuit, 266 F. 2d 190. The Supreme Court denied certiorari, 361 U.S. 827.

17. Under date of March 29, 1957, plaintiff and the Commissioner of Internal Eevenue, through his duly authorized representative, agreed in writing under the provisions of Section 276(b) of the Internal Eevenue Code of 1939, as amended, to extend the period within which the Commissioner might make an assessment of Federal income taxes against plaintiff for the calendar year 1953. Under dates of March 17, 1958 and May 29, 1959, respectively, extensions of said agreement of March 29,1957, were executed by plaintiff and the Commissioner of Internal Eevenue so that the period within which the Commissioner might make an assessment against plaintiff for the year 1953 was extended to December 31,1960.

18. On August 14, 1959, within the period of limitation prescribed by Section 322(b)(3) of the Internal Eevenue Code of 1939, as amended, plaintiff duly filed with the District Director of Internal Eevenue for the St. Louis, Missouri, District a claim for the refund of income taxes paid for the year in the sum of $160,417.40 with interest. The grounds asserted for the allowance of such claim were substantially the same as those asserted in plaintiff’s petition filed with this Court. Plaintiff has at no time filed refund claims for 1950,1951 or 1952 contending that it was entitled to deduct from its gross income in those years the respective amounts of $450, $1,275 and $7,450 paid to employees by the trustee in 1950, 1951 and 1952 and representing funds contributed to the savings trust by plaintiff.

19. The compensation totaling $308,495, for which plaintiff claims a deduction in this suit, was accrued by plaintiff and paid by it to the Mercantile-Commerce Bank & Trust Company, as trustee, in 1950,1951 and 1952 in the respective amounts of $89,190, $104,625 and $123,855. The total $308,495 was in turn paid out of the trust to plaintiff’s employees in 1953 (the difference in the total contributions to the trust and this amount having been paid out in the years 1950,1951 and 1952).

20. There is no dispute between the parties as to the essential facts of the case which have been stipulated. The parties have agreed, with the approval of the commissioner, that the determination of the amount of recovery, if any, will be reserved under Rule 38 (c) for further proceedings.

CONCLUSION OE LAW

Upon the foregoing findings of fact which are made a part of the judgment herein, the court concludes as a matter of law that plaintiff is entitled to recover, and judgment is entered to that effect. The amount of recovery will be determined pursuant to Rule 38(c).

In accordance with the opinion of the court and a memorandum report of the commissioner as to the amount due thereunder, it was ordered on July 24, 1963, that judgment for plaintiff be entered for $195,269.60, together with interest thereon as provided by law running from December 14,1954, on $72,658.74 of said sum and from October 28, 1960, on the remainder of $122,610.86. 
      
      
         A summary of the plan Is set out In finding 6.
     
      
       Internal Revenue Code of 1939, 26 U. S. C. (I. R. C. 1939) § 23 (1952 ed.), as follows :
      “§ 23. Deductions from gross Income.
      “In computing net income there shall be allowed as deductions:
      “(a) Expenses.
      “(1) Trade or business expenses.
      “(A) In general.
      “All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually rendered ; * * *.
      * >i<
      
        “(p) Contributions of an employer to an employees’ trust or annuity plan and compensation under a deferred-payment plan.
      “(1) General rule.
      “If contributions are paid by an employer to or under a stock bonus, pension, profit-sharing, or annuity plan, or if compensation is paid or accrued on account of any employee under a plan deferring the receipt of such compensation, such contributions or compensation shall not be deductible under subsection (a) but shall be deductible, if deductible under subsection (a) without regard to this subsection, under this subsection but only to the following extent:
      “(A) In the taxable year when paid, if the contributions are paid into a pension trust, and if such taxable year ends within or with a taxable year of the trust for which the trust is exempt under section 165(a), in an amount determined as follows:
      * $ * # * *
      “(B) In the taxable year when paid, in an amount determined in accordance with subparagraph (A) of this paragraph, if the contributions are paid toward the purchase of retirement annuities and such purchase is a part of a plan which meets the requirements of section 165(a), (3), (4), (5), and (6), * * *.
      “(C) In the taxable year when paid, if the contributions are paid into a stock bonus or profit-sharing trust, and if such taxable year ends within or with a taxable year of the trust with respect to which the trust is exempt under section 165(a), in an amount not in excess of * * *.
      “(D) In the taxable year when paid, if the plan is not one included in paragraphs (A), (B), or (C), if the employees’ rights to or derived from such employer’s contribution or such compensation are non-forfeitable at the time the contribution or compensation is paid.”
     
      
      
        Seibert v. United States, 129 U.S. 192 (1889) ; Patterson v. United States, 359 U. S. 495 (1959).
     
      
      
        Produce Reporter Company, 18 T. C. 69 (1952), affirmed 207 F. 2d 586 (C.A. 7, 1953) ; McClintock-Trunkey Co. v. Commissioner, 217 F. 2d 329 (C.A. 9, 1954) ; Tavannes Watch Co. v. Commissioner, 176 F. 2d 211 (C.A. 2, 1949) ; Lincoln Electric Co. Employees’ Profit-Sharing Trust v. Commissioner, 190 F. 2d 326 (C.A. 6, 1951) ; H. Rep. No. 2333, 77th Cong., 2d Sess., 1942-2 Cum. Bull. 413, 450-452 ; Sen. Rep. No. 1631, 77th Cong., 2d Sess., 1942-2 Cum. Bull. 541, 606-610.
     
      
       Pro: 4 Mertens, Law of Federal Taxation, Sec. 25B.42 ; Executive Compensation: Deferring Compensation (Excluding Stock Options and Qualified Pension Plans), Twentieth Annual N.Y.U. Institute on Federal Taxation, pp. 405 (1962) ; 45 Va. L. Rev. 1249 (1959) ; 13 Vand. L. R. 461 (1960) ; Con: 28 Geo. Wash. Univ. L. R. 803 (1960) ; 58 Mich. L. Rev. 799 (1960),
     