- 21 -
member investment income set aside by the Trust for the payment
of reasonable costs of administration directly connected with a
purpose described in section 512(a)(3)(B)(ii) is not subject to
the limitation prescribed by section 512(a)(3)(E)(i). We have
rejected those contentions, and therefore those premises are not
valid. We further reject the Trustee’s argument that the limita-
tion prescribed by section 512(a)(3)(E)(i) does not apply to the
non-member investment income at issue that the Trust set aside to
provide for the payment of reasonable costs of administration
directly connected with a purpose described in section
512(a)(3)(B)(ii).18
As a VEBA described in section 501(c)(9), a set-aside by the
Trust of non-member income for a purpose described in section
512(a)(3)(B)(ii) is to be taken into account as exempt function
income under section 512(a)(3)(B) only to the extent that such
18It is noteworthy that the Trust agreement establishing the
Trust provided that such costs are subject to the limitation
prescribed by sec. 512(a)(3)(E)(i). That Trust agreement pro-
vided in pertinent part:
8.2 Payment of Benefits. * * * Any Trust Fund income
not used in the year in which it was earned to
provide life, sickness, accident or other benefits
described in Section 501(c)(9) of the Code and the
regulations thereunder or to pay reasonable admin-
istrative costs associated with the delivery of
those benefits shall be set aside to provide for
the payment of the benefits and benefit costs
described in Section 512(a)(3)(B)(ii) of the Code
and limited by Section 512(a)(3)(E) of the Code in
the immediately following year. * * * [Emphasis
added.]
Page: Previous 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 NextLast modified: May 25, 2011