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As discussed infra, section 1.419-1T, Q&A-5(b)(1), Temporary
Income Tax Regs., 51 Fed. Reg. 4324 (Feb. 4, 1986), effectively
denies the prefunding of claims by using differing taxable year
ends. In an internal memorandum dated April 23, 1986, petitioner
recognized that that regulation could close the "loophole created
by the statute's ambiguity." During 1986, petitioner increased
its section 419A account limit by allegedly creating a reserve
for PRMB's under section 419A(c)(2). Wyatt, petitioner's
actuary, calculated that the present value of petitioner's
PRMB's, as of December 1, 1986, for retirees was $20,446,059, and
for current active employees was $46,699,569, the deductible
portion of which was $4,945,000. Accordingly, in Wyatt's view
the total deductible cost of PRMB's for petitioner's tax year
ending December 31, 1986, was $25,391,059. The associated
administrative expenses were $1,650,419, which is 6.5 percent of
the deductible PRMB's, and when they are added to the cost of the
PRMB's, the total is $27,041,478.
On December 30, 1986, petitioner contributed $27 million to
the VEBA Trust. That contribution was the only one made to the
VEBA Trust during the 1986 calendar year. The balance of the
VEBA Trust on December 31, 1986, was $35,058,670. During the
1987 Plan year, the VEBA Trust paid benefit claims, including
related expenses, of $31,572,854. During the 1987 Plan year,
only $2,787,000 was paid by the VEBA Trust for benefit claims of
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