Parker-Hannifin Corporation - Page 4

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          were irrevocable and could not revert to petitioner under the               
          terms of the Trust Agreement.                                               
               The VEBA Trust uses the cash method of accounting and has a            
          fiscal year ending June 30.  The VEBA Trust qualifies as a                  
          welfare benefit fund under section 419(e).  The Parker-Hannifin             
          Group Insurance Plan and the Long-Term Disability Plan for                  
          Salaried Employees of Parker-Hannifin Corporation were funded by            
          the VEBA Trust.                                                             
               Pursuant to an administrative services agreement dated                 
          February 24, 1981, Provident Life and Accident Insurance Company            
          (Provident) agreed to provide administrative services for certain           
          of petitioner’s employee benefits.  Provident continued to                  
          provide such services during the year in issue.                             
               On June 30, 1987, petitioner contributed $42 million (the              
          1987 contribution) to the VEBA Trust.  Effective July 1, 1987,              
          the maximum Federal corporate income tax rate decreased from 46             
          to 34 percent.  Petitioner’s 1987 contribution to the VEBA trust            
          included the following amounts:                                             
          Incurred but unpaid medical, dental, &                                      
                    short-term disability benefits          1$9,022,227               
               Administration fees                             2479,089               
               Long-term disability benefits                2,500,000                 
               Union medical benefits                       3,210,991                 
               Postretirement benefits                                                
                    Retirees                                10,779,650                
                    Active employees                        16,133,508                
               Total                                       3$42,125,465               
                    1Respondent has allowed a deduction for this amount.              
                    2Respondent has allowed a deduction for this amount.              
                    3Petitioner’s chief financial officer suggested                   
               rounding the 1987 contribution to $42 million.                         



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Last modified: May 25, 2011