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postretirement life insurance benefits to be provided to covered
employees. Sec. 419A(c)(2).
In the event that a taxpayer did not fund a reserve for
CIBU's or postretirement medical or life insurance benefits, the
account limit for that taxable year would be zero. Any amount
left in the VEBA Trust at yearend in such a case would cause a
reduction in the deduction equal to that remaining balance
because that amount would not qualify as QDC, for although the
requirement that the contribution be made during the taxable is
satisfied, such remaining funds were not used to provide welfare
benefits during the taxable year. Sec. 419(c).
Issues
The parties disagree as to whether petitioner is
automatically (i.e., without having to show reasonableness)
entitled to use the safe harbor limits of section
419A(c)(5)(B)(i) and (ii) (discussed infra) in computing the
addition to the QAA for medical, dental, and short-term
disability benefit CIBU's, and associated administrative costs.
The parties also disagree as to whether petitioner's $27 million
contribution, or a part of that contribution, to its VEBA Trust
during 1986 funded a reserve over the working lives of the
covered employees for the provision of PRMB's. Finally,
petitioner challenges the validity of section 1.419-1T, Q&A-
5(b)(1), Temporary Income Tax Regs., 51 Fed. Reg. 4324 (Feb. 4,
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