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worldwide manufacturer of electrical distribution and control
equipment and electronic materials, components, products, and
systems for industrial and construction markets. Petitioner is
an accrual basis taxpayer and uses a calendar yearend. Prior to
June 1991, petitioner's common stock was traded on the New York
Stock Exchange.
Establishment of the VEBA Trust
On December 22, 1982, petitioner established the Square D
Company and Subsidiaries Employee Welfare Benefit Trust (the VEBA
Trust) to serve as the funding vehicle for a single welfare
benefit plan, known as the Square D Company and Subsidiaries
Employee Welfare Benefit Plan (the Plan). The Plan provided for
medical, dental, accident, sickness (short-term disability), and
long-term disability benefits for eligible employees and retirees
of petitioner and its subsidiaries. The trustees of the VEBA
Trust were Dexter S. Free, James M. Vetta, and Donald E. Wilson,
all of whom are officers of petitioner. The trust agreement
authorized the establishment of a depository account for trust
assets. Funds of the VEBA Trust were deposited in an account
with First Interstate Bank of Washington, N.A., pursuant to a
custodial agreement dated December 31, 1982. The VEBA Trust was
a "welfare benefit fund" under section 419(e) at all relevant
times.
Prior to 1985, petitioner funded the VEBA Trust during each
year for that year's employee benefit liabilities (and
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