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Petitioner received a determination letter from the District
Director of the Internal Revenue Service on November 29, 1988,
stating that the application for recognition of exemption under
section 501(c)(9) had been approved. The determination letter
states: “No opinion is expressed or implied as to whether
employer contributions to * * * [the VEBA Trust] are deductible
under the Code.”
Petitioner did not generate a contemporaneous census of its
employees for whom benefits were to be provided through the VEBA
Trust. Such a census would have included the date of birth,
gender, family coverage, and date of hire for each employee for
purposes of funding the VEBA in petitioner’s 1987 fiscal year.
Petitioner reflected $33.6 million of the 1987 contribution
on its balance sheet as a “prepaid expense” under the category of
current assets and $8.4 million of the 1987 contribution on its
balance sheet as an “other asset”.
The Financial Accounting Standards Board Statement No. 81
relating to "Disclosure of Postretirement Health Care and Life
Insurance Benefits" (FASB 81) was in effect during the years in
issue. FASB 81 required that, at a minimum, the following
information be disclosed: (1) A description of the benefits
provided and the employee groups covered; (2) a description of
the accounting and funding policies followed for those benefits;
(3) the cost of those benefits recognized for the period, unless
the provisions of paragraph 7 apply; and (4) the effect of
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