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Trust’s income for 199210 constitute exempt function income, as
defined in section 512(a)(3)(B), and that such amounts of income
are excluded from the calculation of its UBTI under section
512(a)(3)(A). It is respondent’s position that, because of the
limitation prescribed by section 512(a)(3)(E)(i), the amounts of
investment income that the Trust reported as unrelated business
income in Forms 990-T for the years at issue are not excluded
from the calculation of the Trust’s UBTI.11 Petitioner bears the
9(...continued)
unrelated business income in its Form 990-T for 1991. We find
that petitioner has failed to show that such remaining amount of
investment income for 1991 (1) constitutes exempt function
income, as defined in sec. 512(a)(3)(B), or (2) otherwise is not
subject to the tax on UBTI imposed by sec. 511(a).
10On brief, the Trustee acknowledges that for 1992 not only
its investment income but also certain of its other income was
set aside, and subsequently expended, for $1,853,529 of reason-
able costs of administration directly connected with providing
for the payment of health care benefits. The Trustee further
acknowledges that it reported in Form 990-T for 1992 only
$1,155,793 of its investment income for that year as unrelated
business income. Respondent made no determination in the notice
that the Trust’s remaining investment income for 1992 (i.e.,
$405,095), which the Trust did not treat as unrelated business
income in Form 990 and Form 990-T for that year, should be
included in calculating the Trust’s UBTI for that year. We
conclude that the only amount of the Trust’s income for 1992 that
is at issue in this case is $1,155,793 of investment income that
the Trust reported as unrelated business income in Form 990 and
Form 990-T for that year. Our references hereinafter to the
amount at issue for 1992 shall be to the correct amount at issue
for 1992, and not to the amount (i.e., $1,853,529) that the
Trustee claims on brief is at issue for that year.
11Respondent also advances arguments on brief as to why
respondent’s determinations in the notice should be sustained.
However, as noted above, the Trustee no longer contests those
(continued...)
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