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As in the case of the postretirement benefits, petitioner
did not disclose the establishment of reserves for long-term
disability benefits in its financial reporting for its 1987 year.
Only those employees involved in the implementation of the VEBA
were informed about the existence of the VEBA. By making the
contribution for long-term disability benefits, petitioner
received a substantial tax savings. Petitioner’s treasurer
estimated in a July 1987 letter that the 1987 contribution would
be depleted in 12 to 18 months after the VEBA was established.
The 1987 contribution was depleted by the second month of
petitioner’s 1989 year. Petitioner made no contribution for
long-term disability benefits that were incurred but unpaid
during its 1988 year, and, in the following years, petitioner
contributed to the VEBA through monthly contributions
approximating the benefits that were paid. No indication of
reserves was shown on petitioner’s Form 1024, Application for
Recognition of Exemption. Again, while disclosure is not
required by the applicable Code and regulations, the lack of
disclosure, along with petitioner’s other actions regarding the
VEBA Trust, shows that petitioner did not accumulate assets in
the VEBA Trust for the purpose of setting aside assets for the
payment of future long-term disability benefits that were
incurred but unpaid.
We cannot conclude that these assets were set aside for the
above-stated purposes, and, thus, we need not address the
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