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F E D E R A L R E G IS T E R , S a t u r d a y , J a n u a r y 22, 1938

FEDERALW REGISTER
1934 ST

Published by the Division Archives, pursuant to the Register Act, approved July ulations prescribed by the approval of the President.

of the Federal Register, The National authority contained in the Federal 26, 1935 49 Stat. L. 500, under reg Administrative Committee, with the r
The Administrative Committee consists of the Archivist or Act ing Archivist, an officer of the Department of Justice designated by the Attorney General, and the Public Printer or Acting Public Printer.
The daily issue o f the F ederal R egister will be furnished by mail to subscribers, free of postage, for $1 per month or $10 per year;
single copies 10 cents each; payable in advance. Remit by money order payable to Superintendent of Documents, Government Print ing Office, Washington, D. C.
Correspondence concerning the publication o f the F ederal R egister should be addressed to the Director, Division of the Federal Register, The National Archives, Washington, D. C.

T A B L E OF C O N T E N T S
Securities and Exchange Commission:
Order for hearing, etc., offering sheet by:
Sulzbach, Fred X. Marlam ee & Shelton-Flowers T r a c t .__________ __________________________
Treasury Department:
Bureau of Customs:
Bonded wool and camel hair, extension of 3-year period_______________________________________
Countervailing dutyDried salt fish from Nova S c o tia _______________________________________
Bureau of Internal Revenue:
Income tax, Regulations 94 amended relative to payments to employeespensiontrusts-----------

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for the taxable year under section 23 p and this article which was allowable as a deduction from gross income for any prior year. An employer who adopts or has adopted a reasonable pension plan, actuarially sound, and who estab lishes, or has established, and maintains a pension trust for the payment of reasonable pensions to his employees if the trust is exempt from tax under section 165, relating to trusts created for the exclusive benefit of employees shall be allowed to deduct from gross income reasonable amounts paid to such trust, in accordance with the pension plan including any reasonable amendment thereof, as follows:
a I f the plan contemplates the payment to the trust, in advance of the time when pensions are granted, of amounts to provide for future pension payments, then 1
amounts paid to the trust during the taxable year repre senting the pension liability applicable to such year, deter mined in accordance with the plan, shall be allowed as a deduction for such year as an ordinary and necessary busi ness expense, and in addition 2 one-tenth of a reasonable amount transferred or paid to the trust during the taxable year to cover in whole or in part the pension liability ap plicable to the years prior to the taxable year, or so trans ferred or paid to place the trust on a sound financial basis, shall be allowed as a deduction for the taxable year and for each of the nine succeeding taxable years;
b I f the plan does not contemplate the payment to the trust, in advance of the time when pensions are granted,
of amounts to provide for future pension payments, then 1
amounts paid to the trust during the taxable year repre senting the present value of the expected future payments in respect of pensions granted to employees retired during the taxable year shall be allowed as a deduction for such year as an ordinary and necessary business expense, and in addition 2 one-tenth of a reasonable amount trans ferred or paid to the trust during the taxable year to cover in whole or in part the present value of the expected future payments in respect -of pensions granted to employees re tired prior to the taxable year, or so transferred or paid to place the trust on a sound financial basis, shall be allowed as a deduction for the taxable year and for each of the nine succeeding taxable years.
The right to a deduction under section 23 p will be recognized in cases where the pension trust may not be per petual, provided the trust is of such a character as to evi dence good faith on the part of the employer actually to pay the amounts placed in trust for employees pension purposes.
However, should any portion of the funds of a pension trust revert to the possession, ownership, or control of the employer by reason of the termination of the trust or otherwise, such amount except to the extent that it represents a payment to the pension trust made by the employer in acordance with the pension plan and pursuant to paragraph a or b of this article, and not theretofore allowed as a deduction to the employer shall be returned as income by the employer for the taxable year in which it so reverts, unless prior to the close of such year it shall again be placed in trust for the benefit of employees under provisions satisfactory to the Commissioner.
Reasonable payments made by an employer during the taxable year directly to pensioners on account of pensions in respect of which no payment has been made to a pension trust shall be allowed as a deduction from gross income for such year as an ordinary and necessary business expense.
Devices of whatever nature for withdrawing profits or paying salaries to officers are not pension trusts within the meaning of the Act and this article.
A pension trust maintained by affiliated corporations for the exclusive benefit of their employees is within the scope of sections 23 p and 165.
The application of section 23 p may be illustrated by the following examples:
Example Accruals in advance of pensions granted: In 1936 the M Company adopted a reasonable pension plan and established a pension trust, which was exempt from tax under section 165. During the year and upon the basis of an actuarial computation the company paid $8,950,000
to the trust. A t the time of the payment and in accord ance with the pension plan of the company, the pension liability applicable, to the years prior to 1936, in respect of employees then on the retired roll, for pensions to be paid in the future, was $2,000,000; the pension liability applicable to the years prior to 1936, in respect of employees on the active roll, for pensions to be paid in the future, was $6,500,000; the payment required to cover the pension liabil ity applicable to the taxable year 1936 for pensions to be paid in the future, was $450,000. The amount paid to re tired employees of the M Company by the pension trust as pensions during 1936 was $360,000.
The deduction for 1936 is computed as follows:
a Entire amount paid to pension trust representing the pension liability applicable to 1936 for pen sions to be paid in the future_____________________
b One-tenth of $8,500,000, amount transferred to pension trust to cover the pension liability appli cable to the years prior to 1936, in respect of employees on either the retired roll or the active roll, for pensions to be paid in the future________
Total deduction______________________________

$450,000

850,000
1,300,000

The amount of $360,000 paid to pensioners is not allow able as a deduction for income tax purposes since it was paid by the pension trust and not by the M Company.