Rev. Rul. 73-245

Advice has been requested regarding the deductibility of employer contributions to the trust fund established under the supplemental unemployment benefit plan described in Rev. Rul. 56-102, 1956-1 C.B. 90, and Rev. Rul. 59-256, 1959-2 C.B. 59, after an amendment to the plan to provide for the payment of a lay-off moving allowance under the circumstances described below.

Rev. Rul. 56-102 holds that employer contributions to an independently controlled trust fund, created solely for the purpose of furnishing supplemental unemployment benefits to certain employees, constitute ordinary and necessary business expenses that are deductible from gross income, under section 162(a) of the Internal Revenue Code of 1954, in the taxable year in which paid or incurred.

Rev. Rul. 59-256 holds that an amendment to the supplemental unemployment benefit plan considered in Rev. Rul. 56-102 to provide for lump-sum separation payment to certain eligible employees does not adversely affect the deductibility of employer contributions to the fund.

A supplemental unemployment benefit plan of the type described in Rev. Rul. 56-102 and Rev. Rul. 59-256 has been amended to provide for the payment of a so-called "lay-off moving allowance." Under the plan this allowance may be claimed by an employee whose employment at one plant is terminated due to discontinuance of operations if he accepts an offer of employment at another of the employer's plants. The plan provides that to be eligible the employee must be entitled to a lump-sum separation payment if he declines to accept the offer of employment at the new plant, that he must actually move his residence as a result of accepting the offered employment, and that the changed place of employment must be at least a specified distance from the original place of employment. The lay-off moving allowance may not exceed a stated amount. Any future lump-sum separation payment due an employee who has once received a lay-off moving allowance is reduced by the amount of that moving allowance.

This amendment has provided an additional benefit for certain employees whose employment at one plant has been terminated as a result of discontinuance of the plant or operation. Such amendment was made as a consequence of the impending involuntary separation and to prevent the separation. It does not alter the nature of the plan or the fund in any material respect.

Accordingly, employer contributions to the trust fund under the amended plan are ordinary and necessary expenses that are deductible from gross income under section 162(a) of the Code in the taxable year when paid or incurred.

Rev. Rul. 56-102 and Rev. Rul. 59-256 are modified.