Does anyone know whether a company can contribute a promissory note or its stock to fund a VEBA and, if it can, whether such a contribution is deductible? Also, if you could include any cites (to the law, regs, etc) I would appreciate it.

Thank you for any comments. I appreciate it.
D.L.

Assuming that the VEBA is for an arrangement subject to ERISA, here is what I know on this subject.

1. Promissory note would be a no. No deduction is available - there is an old retirement plan case on this, not sure the full cite, but it was Don E. Williams Co. ERISA would generally treat this as a prohibited transaction - extension of credit.

2. Employer securities. Tax deduction privilege would be the same as for a retirement plan, covered by a couple of very old Revenue Rulings 62-217 and 73-583. ERISA rules would go to the general rule on employer securities - 10% of plan assets because a VEBA would not be an eligible individual account plan.

If the client worries about SFAS 106 - note that employer securities don't count as plan assets for funding purposes unless they are freely marketable.

NOW - this is off the top of my head, so you need to verify the cites. But, I am pretty confident in the fundamentals.