Parker-Hannifin Corporation - Page 18

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          1.419A-2T, Temporary Income Tax Regs., 50 Fed. Reg. 27428                   
          (July 3, 1985).                                                             
          Postretirement Benefits                                                     
               Section 419A(c)(2) provides for an additional reserve for              
          postretirement medical and life insurance benefits:                         
                         (2) Additional reserve for post-                             
                    retirement medical and life insurance                             
                    benefits.--The account limit for any taxable                      
                    year may include a reserve funded over the                        
                    working lives of the covered employees and                        
                    actuarially determined on a level basis                           
                    (using assumptions that are reasonable in the                     
                    aggregate) as necessary for--                                     
                              (A) post-retirement medical                             
                         benefits to be provided to covered                           
                         employees (determined on the basis                           
                         of current medical costs), or                                
                              (B) post-retirement life                                
                         insurance benefits to be provided                            
                         to covered employees.                                        
               Petitioner included $10,779,650 in its 1987 contribution for           
          postretirement benefits for retirees.  The 1987 contribution                
          included $16,133,508 for postretirement benefits for active                 
          employees.  Respondent disallowed the deduction of these                    
          contributions on petitioner’s fiscal 1987 Federal income tax                
          return.                                                                     
               Petitioner argues that section 419A(c)(2) allows a reserve             
          funded over the working lives of covered employees for                      
          postretirement benefits to be included in the account limit                 
          without requiring that specific assets be set aside or that a               
          separate account be created.  Petitioner contends that the                  




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