Parker-Hannifin Corporation - Page 24

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               On June 30, 1987, petitioner had 28,708 employees, of whom             
          approximately 1,854, or 6.46 percent, were represented by unions.           
          The plan was not the result of collective bargaining or required            
          by any agreement with the union.  Petitioner attempts to                    
          distinguish between the union and nonunion contributions under              
          the VEBA by calculating the respective contributions in                     
          isolation.  The plan itself, however, does not make that                    
          distinction and cannot as a whole reasonably be characterized as            
          a welfare benefit fund maintained pursuant to a collective                  
          bargaining agreement.                                                       
               Because the contribution for collectively bargained                    
          employees does not meet the requirements of section 419A(f)(5),             
          the deductibility of the contribution for union medical benefits            
          must be tested under section 419A(c)(1).  The analysis of the               
          treatment of the contribution for medical benefits to union                 
          members and of the contribution for long-term disability claims             
          is combined below.                                                          
          Medical Benefits for Union Members and Long-Term Disability                 
          Claims                                                                      
               In addition to the medical benefits for union members,                 
          petitioner included $2.5 million in the 1987 contribution for               
          long-term disability claims.  Petitioner alleges that the                   
          long-term disability claims were incurred but unpaid as of the              
          close of its 1987 fiscal year.                                              
               Section 419A(c)(1) provides the account limit for claims               
          described in section 419A(a), including disability benefits, sec.           



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