- 36 -
1986.6 Second, the amount of the deduction shall not exceed the
fund's qualified cost for the fund's taxable year. Sec. 419(b);
sec. 1.419-1T, Q&A-4, Temporary Income Tax Regs., 51 Fed. Reg.
4324 (Feb. 4, 1986). As discussed supra, the qualified cost is
the qualified direct cost, $29,651,067, plus any additions to a
QAA, $8,447,418,7 less the fund's after-tax income for the year,
$1,512,700, which in the instant case yields $36,585,785. Sec.
419(c). The third limitation, contained in section 1.419-1T,
Q&A-5(b)(1), Temporary Income Tax Regs., 51 Fed. Reg. 4324 (Feb.
4, 1986), causes contributions made after the close of a fund's
taxable year, but during the taxpayer's taxable year, to be
included in the fund's yearend balance. The dispute of the
parties is whether the regulation is valid.
1. Mechanics of the Regulation
Section 1.419-1T, Q&A-5(b)(1), Temporary Income Tax Regs.,
supra, provides:
(b)(1) Pursuant to section 419A(i), notwithstanding
section 419 and � 1.419-1T, contributions to a welfare
benefit fund during any taxable year of the employer
beginning after December 31, 1985, shall not be
deductible for such taxable year to the extent that
such contributions result in the total amount in the
6 This amount comprises the Dec. 30, 1986, contribution of $27
million and the $1,937,701 disallowed in 1985 and deemed to have
been contributed on Jan. 1, 1986.
7 The $8,447,418 addition to the QAA comprises CIBU's of
$7,619,725, associated administrative costs of $395,683, and an
increase pursuant to sec. 419A(f)(7) of $432,010.
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