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burden of establishing that its position is correct. See Rule
142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).
Before addressing the issues presented, we set forth the
pertinent statutory provisions implicated by those issues.12
Although section 501(a) exempts a VEBA from tax, section 501(b)
subjects a tax-exempt VEBA to tax to the extent provided in
sections 511 through 515 relating to the tax on UBTI. Section
511(a) imposes a tax for each taxable year on the UBTI of a VEBA,
as defined in section 512.
Section 512(a)(1) provides the following general definition
of UBTI:
(1) General rule.–-Except as otherwise provided in
this subsection, the term “unrelated business taxable
income” means the gross income derived by any organiza-
tion from any unrelated trade or business (as defined
in section 513) regularly carried on by it, less the
deductions allowed by this chapter which are directly
connected with the carrying on of such trade or busi-
ness, both computed with the modifications provided in
subsection (b).
Section 512(a)(3) provides the following special rules in
defining the UBTI of a VEBA described in section 501(c)(9):
(3) Special rules applicable to organizations
described in paragraph (7), (9), (17), or (20) of
section 501(c).--
11(...continued)
determinations.
12Although the statutory provisions set forth below apply
not only to a VEBA but also to certain other organizations, our
discussion generally is limited to the application of those
provisions to a VEBA.
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