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Petitioner did not change the nature or type of medical, dental,
accident, sickness, and long-term disability benefits paid
through the VEBA Trust. Additionally, petitioner did not change
the procedures for payment of such benefit claims by the VEBA
Trust at the time the yearend was changed.
The VEBA Trust's account balance at First Interstate on
November 30, 1985, was $1,835,475. On December 11 and 20, 1985,
petitioner contributed $700,000 and $300,000, respectively, to
the VEBA Trust. On December 27, 1985, petitioner contributed
$36,600,000 to the VEBA Trust. Petitioner claimed a deduction on
its 1985 Federal income tax return for these contributions
($37,600,000) and other contributions made earlier during 1985.
Of the total deduction, $1,937,701 was disallowed by respondent
as an amount in excess of petitioner's allowable deduction. In
accordance with the trust agreement, the VEBA Trust's assets,
including the December 1985 contributions and the VEBA Trust's
investment income, were used to pay medical, dental, accident,
sickness, and long-term disability benefits (and administrative
costs) under the plan to petitioner's employees and retirees as
those benefits (and costs) came due during the 1986 plan year.2
No contributions were made to the VEBA Trust from January 1986
through November 30, 1986. The VEBA's account balance at First
Interstate on November 30, 1986, was $11,297,108.
2 References to VEBA Trust years after the yearend change
include December of the previous year.
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