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of providing employee medical and life insurance, long-term
disability benefits, and union medical benefits during 1987.
In the notice of deficiency, respondent allowed petitioner
partial deductions in the amount of $9,022,227 for incurred but
unpaid medical, dental, and short-term disability benefits and
$353,624 for administrative expenses, none of which are at issue
in this case. Respondent has conceded that petitioner is
entitled to a deduction in the amount of $125,465 for additional
administrative expenses. The amount of the 1987 contribution
remaining in dispute is $32,498,684.
OPINION
Section 419 limits the deduction for contributions paid or
accrued by an employer to a welfare benefit fund to the
“qualified cost” for the taxable year. Sec. 419(b). “Qualified
cost” includes the qualified direct cost for the taxable year and
any addition to a qualified asset account for the taxable year,
subject to the section 419A(b) limitation. Sec. 419(c)(1).
Section 419A provides rules governing additions to the qualified
asset account. “Qualified asset account” is defined as “any
account consisting of assets set aside to provide for the payment
of (1) disability benefits, (2) medical benefits, (3) SUB
[supplemental unemployment compensation benefit] or severance pay
benefits, or (4) life insurance benefits.” Sec. 419A(a).
Additions to the qualified asset account are constrained by the
account limit, as defined by section 419A(c). Sec. 419A(b).
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