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benefits, whereas petitioner asserts that in General Signal and
Parker-Hannifin Corp. the VEBA's were short-lived tools utilized
primarily as a mechanism for accelerating expenses prior to the
corporate tax rate reduction. Although it may be true that
petitioner's VEBA Trust has been used to provide employee welfare
benefits since 1982, our inquiry is not whether the VEBA Trust
was used improperly for tax avoidance purposes. Rather, the
question is whether petitioner created a reserve for PRMB's
funded over the working lives of its covered employees. Such
reserves were not provided for by the Code for tax years ending
prior to December 31, 1985. Petitioner increased its account
limit for a reserve contribution in 1986 and 1987 but then ceased
such funding. Because we must decide whether a reserve was in
fact created, it is irrelevant how long petitioner utilized a
VEBA Trust, or that it still has its VEBA Trust.
For the foregoing reasons, we hold that no reserve was
created.
C. Section 1.419-1T, Q&A-5(b)(1), Temporary Income Tax
Regs.
The parties, on brief, agree that under section 419 a
contribution to a VEBA Trust is not deductible unless it
satisfies the following two conditions (among others). First,
the contribution is deductible only to the extent it is paid to
the fund during the taxable year. Sec. 419(a)(2). The parties
agree that $28,937,701 was paid or deemed paid to the fund during
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