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for the 1988 plan year should have been, if properly funded,
$24,254,478 ($27,041,478 less $2,787,000). The yearend balance
on November 30, 1987, was in fact only $7,992,215. The
deductible contribution amount for the 1988 plan year was
$13,243,405.5 During the 1988 year, $4,092,000 was paid for
PRMB's. Accordingly, the increase in the required reserve at the
1988 plan yearend is $9,151,405 ($13,243,405 less $4,092,000).
Consequently, the total reserve balance should be $33,405,883 at
the 1988 yearend ($24,254,478 plus $9,151,405). The November 30,
1988, yearend balance of the VEBA Trust, however, was $1,525,484,
which supports a conclusion that, in fact, no reserve was funded.
Petitioner claims that it continued to fund the reserve for
PRMB's during 1988. Petitioner, however, ceased funding the VEBA
Trust for PRMB's after the December 1987 contribution, and
sometime during October 1988, the VEBA Trust's assets were
depleted. If petitioner had funded a reserve for the provision
of PRMB's, it would not have depleted the VEBA Trust by October
1988. What apparently caused that depletion was that all of the
assets of the VEBA Trust were used to pay welfare benefit claims
incurred, which is inconsistent with funding a reserve.
Although petitioner did make reference to an insurance trust
on its financial statements, it gave no notice to shareholders,
5 This figure represents only the deductible contribution
amount for employees not covered by collectively bargained
agreements.
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