- 38 -
contributions), to be "treated as an amount in" the WBF as of the
end of the WBF's taxable year.8
In the instant case, the second sentence of the regulation
would prevent petitioner's deduction on the basis of the
following calculation. The fund balance on November 30, 1986,
was $11,297,108. Petitioner contributed $27 million to the VEBA
Trust during December 1986, which under the regulation is deemed
part of the November 30, 1986, yearend balance, equal to
$38,297,108. As was mentioned supra, any balance remaining in
the VEBA Trust which is greater than the QAA account limit is not
allowed as a deduction. Sec. 419A(b). The deemed yearend
balance on November 30, 1986 ($38,297,108), less the QAA account
limit ($8,447,418) equals the amount of the actual contribution
which is not allowable ($29,849,690) as a current deduction.
Because the disallowed amount ($29,849,690) is greater than the
actual contribution for the year ($27 million), there is no
amount of the 1986 contribution which is allowable as a current
deduction. Consequently, the deductible amount for 1986,
pursuant to section 1.419-1T, Q&A-5(b)(1), Temporary Income Tax
Regs., supra, is zero.
Petitioner contends that the limitation in the regulation is
not supported by sections 419 and 419A and, therefore, is an
8 See also sec. 1.419-1T, Q&A-4, Temporary Income Tax Regs.,
51 Fed. Reg. 4324 (Feb. 4, 1986), which similarly defines the
taxable year where the employer and the fund have a different
yearend.
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