- 5 -
administrative costs) as they were incurred (although it could
also have made a contribution for the following year's expected
liabilities). Petitioner also funded the VEBA Trust at yearend
for employee benefit claims that were incurred but unpaid
(CIBU's) and associated administrative costs based on actuarial
assumptions made by Prudential Insurance Co. (Prudential),
petitioner's medical claims adjuster, with respect to medical,
dental, accident, and sickness claims, and the Wyatt Co. (Wyatt),
petitioner's actuarial firm, with respect to long-term disability
claims. Those assumptions were then reviewed by petitioner's
risk management department. Prior to 1985, the VEBA Trust was
not funded for any other liabilities. Petitioner contributed a
total of $57,992,061 to the VEBA Trust between December 31, 1982,
and December 31, 1984, as follows:
Trust Yearend Amount of Contribution
Dec. 31, 1982 $4,806,000
Dec. 31, 1983 25,761,346
Dec. 31, 1984 27,424,715
Petitioner's 1985 VEBA Trust Contributions
During November 1985, the VEBA Trust filed with respondent a
Form 1128 to change its taxable year from a calendar year to a
fiscal year ending November 30. This change was approved by
respondent and became effective as of November 30, 1985. An
internal memorandum dated October 3, 1985, from R.G. Halliday, a
member of petitioner's tax department, to Dexter S. Free, an
officer of petitioner and trustee of the VEBA Trust, stated that
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